Krueger: Corn price slide leads to questions
A while back we kept hearing the lament that all of our corn was being used for ethanol and that was driving up the price of food in the supermarket. Suddenly that has stopped as the price of corn has taken a nose dive into abominably low prices. Corn might not have even bottomed out yet at the current price of around $2.50 per bushel.
Well that fact certainly must be helping the bottom line of the ethanol plants, but making it darned awful inconvenient for the producers of corn to be able to make the bottom line favorable. Many are predicting another debacle close to the farm crisis of the early ‘80s when commodity prices tanked and interest rates went to unbelievable high rates. That condition caused some real angst among American farmers. With the conditions today, with the highest input costs ever, there is no way a farmer is going to realize a profit when it must cost close to $400/acre just to plant and harvest an acre of corn.
So, where are the naysayers talking about the future of America now with the huge slide in corn prices?
If the corn made 150 bushels/acre that amounted to a gross return of $1,050 per acre. Not too bad a return huh? It is for sure that everyone associated with farming had their hand out trying to get a piece of that wonderful pie. From machinery dealers, to seed dealers, to fertilizer companies, to many other associated endeavors they all went after their share of the huge profits made by farmers back then.
So what now? Will these hangers-on lower their prices to accommodate these farmers who will suffer great setbacks from these terribly low prices? That fact probably won’t come about. So what is a farmer to do? Well, for one thing he/she can’t give up. They will have to reap what little they can from crop insurance although the revenue from that little stipend will never make up for the loss about to take place this fall.
With this abrupt change in commodity prices it is head-scratching to understand why prices on the grocery shelves and other consumable inputs have not come down. Looking back over the history of farm prices, the retail price of food always rises when grain prices go up but rarely if ever do they come back down when grain prices tank and go down to very, very low prices. Puzzling huh? Greed maybe? Or as some would name it, “just doing good business!” If it is just doing good business then the bottom line of the food manufactures must really look good. Good old greed never turns down a chance to enhance the bottom line of profit.
This unsavory situation for farmers makes one wonder if we should be investing in ethanol plants now that corn prices are so low. It is doubtful if farmers will have much money to invest anywhere after this fall’s harvest.
The prognosis for any rallies in corn prices is very grim. So, it will be up to crop insurance to keep farmers from falling into non-recoverable financial situations. It is too bad, but that is why we pay such a premium for insuring our crops against catastrophic drop in prices.
Gerald “Jerry” Krueger is a retired educator, coach, commercial pilot and farmer.