Plunging corn prices bring new strategies on farms

With a field full of variables to constantly contend with, the one thing certain about farming is uncertainty.

But one aspect appears to be firming up solidly – and it's not good news.

A glut of corn is driving prices in the wrong direction, and with demand down and costs up, farmers are already considering their strategies for spring.

"We're probably going to plant more soybeans than we normally would," said Tom Fellerman, who farms about 1,300 acres of corn, soybeans and wheat in Hancock County.

In its updated November tally, the U.S. Department of Agriculture estimated the 2013 U.S. corn crop at just under 14 billion bushels, 7 percent higher than the previous record crop of 13.2 billion bushels harvested in 2009.

Last year's average yield of 160.4 bushels per acre was the second-highest on record behind 2009's average of 165.2 bushels per acre, according to the Daily Reporter of Greenfield.

Unfortunately, Indiana farmers are not being rewarded for their production.

With last year's crop up some 30 percent over 2012's drought-ravaged season, corn futures have plummeted from that year's record high of $8.49 per bushel to what analysts now predict will be in the mid-$4 range or below. That means farmers will be lucky to make money on his year's corn crop absent a significant weather or agricultural event in some other part of the corn-producing world.

Local farmers say they're already at their break-even point for corn, and with rising costs such as fertilizer and seed, the shift to another crop makes sense.

Last week, The Associated Press reported a December survey of 1,600 farmers by ag publication Farm Futures indicated a coming 3-percent reduction in corn acreage from last year, with a nearly 8-percent hike in acreage for soybeans.

Jim Cherry, who farms corn and soybeans on about 3,000 acres, agrees that more beans will be planted primarily because lower costs for that crop will allow for a better margin at harvest.

Over the past few years, rising corn prices drew many farmers into corn. Now, increased production is pairing with increased costs to bring the market back to baseline.

"Corn (prices) got too high a couple of years ago, and that wasn't good for anybody," Cherry said. "The biggest problem is that our input costs have gone up. Nitrogen has gone higher the last couple years, and rents have gone up."

If corn prices climbed to $5 a bushel, Cherry said, farmers could make that work, "but that's not going to happen, so we'll just have to figure out how to make a living at $4 to $4.25 (per bushel), he said.

During a late December presentation in Greenfield, Chris Hurt, a Purdue professor of agriculture economics, told local farmers 2014 would be a "real transition year," with farm incomes generally experiencing a flattening trend.

That readjustment will affect more than just corn farmers as declining farm revenues will impact everything from land rents and values to supply-side sectors like fertilizer providers and machinery.

"I think implement dealers might have some trouble selling iron this season," Cherry said.

Ted Smith, owner in charge of agriculture sales for Smith Implements Inc. in Greenfield, agrees.

"Eventually, it could have a devastating effect," Smith said. "The usual cycle is from new (machinery) to used and back to new equipment, and there's a pretty big buildup of used equipment right now.

"We had four pretty good years there, and frankly the farmers had gotten used to that. I think this is going to have a negative effect on a lot of implement dealers."

Across the board, farmers and those who sell to them say sharpening pencils and working on cost reductions will be critical as the corn prices drive down.

However, this is January's agricultural crystal ball, and as every farmer who's done it long enough knows, fortunes can change significantly for the spring and beyond.

Fellerman said if the weather is poor during the planting season and prices continue to drop, a lot more farmers could be switching to soybeans. That might then level out prices for that crop, which analysts predict will remain steady or rise slightly.

"You really don't know what's going to happen. I'm afraid corn and beans both will become unprofitable," said Joe Paxton, who farms 2,000 acres and plans on staying the course with corn.

"I know a lot of guys who are switching to beans, but I'm going to stick with my original plan and keep things the same," Paxton said.

"Hindsight is 20-20, and there's still a lot of guessing going on."