KUNC

         

Slipping farm prices could ripple across rural economy

Farmers have been riding a wave of high corn prices in recent years, but a bumper crop has corn prices dropping. (File: Amy Mayer/Harvest Public Media)
Farmers have been riding a wave of high corn prices in recent years, but a bumper crop has corn prices dropping. (File: Amy Mayer/Harvest Public Media)

Corn farmers across the Midwest have generally done well in recent years thanks to record-high prices, but that relative affluence may be on the downswing. And it could have ripple effects across farm country.

Corn prices dropped more than a dollar over the winter from a harvest price of about $5.40 per bushel. Even if they creep up some, farmers can expect much lower incomes from grain this year, according to University of Illinois farm management professor Gary Schnitkey.

That means farmers, a cornerstone of the rural economy in many places, will likely have less money to spend.

“I would just, in general, see lower purchases of agricultural inputs because of lower prices,” Schnitkey said. “And just less disposable income.”

For the last four years or so, high prices have boosted farmers’ bottom lines. Farmers brought in a record high of more than $130 billion in net income in 2013, according to the Food Agricultural Policy Research Institute. FAPRI projects $99.4 billion in 2014 net income. The steep drop in FAPRI’s projection, however, is still near a record-high.

But when farm income drops, businesses in rural America often feel the impact.

“We’ve seen some pretty high machinery purchases in the last several years,” Schnitkey said. “I would expect those to be lower this year because we have less disposable income.”

A bumper crop of corn last year and proposed cuts to ethanol production are contributing to the lower price forecast.

There may be a silver lining in lower crop prices, however, for farmers that rent large tracts of land. With commodity prices generally expected to stay on the lower end of the recent scale, renters may be able to negotiate deals for cheaper rents.

“Cash rents coming down—we haven’t seen that in a long, long time so it could present opportunities for some people,” Schnitkey said. “And getting those cash rents to come down is a tricky thing. It’s a hard conversation for farmers to have with landowners.”

Projections of commodity prices and demand, of course, are just predictions. Good weather or increased export demand could still shift things in farmers’ favor.

 

Harvest Public Media’s Jeremy Bernfeld contributed to this report.

 

More: Expected bumper crop has price of corn dropping