Farmers try cultivating profits amid low crop prices

Kathryn Cargo By Kathryn Cargo

Aug. 20, 2017 at 9:31 p.m.
Updated Aug. 21, 2017 at 6 a.m.

Juventino Martinez watches processed cotton come through a gin stand and ensures the cotton doesn't jam.

Juventino Martinez watches processed cotton come through a gin stand and ensures the cotton doesn't jam.   Nicolas Galindo for The Victoria Advocate

HILLJE - Lindsey Bowers and her husband have seen the best corn crop in her farming years, but she won't be justifiably paid for it along with most farmers in the Crossroads.

Bowers, United Agricultural Cooperative Inc. grain merchandiser and hedger, said commodity prices are slightly better than last year but not by much. High yields are helping farmers break even, but not all will have profits.

"They're terrible," she said. "The yields are helping compensate for the prices some. It's just disheartening. We're making some of the very best crops of our lives."

Farmers are netting around $3 a bushel of corn and $6 for 100 pounds of sorghum. This time last year, farmers netted around $2.85 for corn and $5.37 for sorghum.

"All of these are below break-even price," she said.

The break-even price for farmers not only depends on the commodity price, but also input costs ranging from machinery to crop chemical applications.

Farmers are netting around $8 a bushel of soybeans, which is worse than this time last year at $9.46, Bowers said.

"We've been operating the last two to three years at very challenging prices," she said.

Farmers are looking for opportunities to market their crops at the best prices they can and reduce input costs where possible.

Some farmers also lock in the price of their crops ahead of time with contracts between them and grain elevators.

Independent farmer Michael Sulak, of Louise, locked the price of his corn before he harvested the crop and averaged about $4 a bushel, he said. Sulak watched the commodity prices change daily until he saw a price at which he could be profitable and locked it in with a futures contract.

"Every time there was a price spike starting in February and March, I would sell a little bit of my crop," he said. "I sold a portion of my crop 50 cents higher than it is right now."

Sulak has been locking in prices since he began independently farming eight years ago.

This year, he saw record yields for the operation at about 150 bushels per acre for corn and 6,700 pounds per acre for sorghum. He planted and harvested about 360 acres of corn and 200 acres of sorghum.

He's sold the majority of his crop at profitable prices, he said. Even so, the market proves to be a struggle. Going into the field, farmers know there will be good and bad years. Sulak makes sure to prepare for bad years during the good years.

"Basically right now we're just holding on to get through these years and know in a few more years prices will be higher and we'll make more then," he said.

With the market, it's more difficult for farmers to get financing from banks to purchase the farm equipment they need to plant and harvest, Bowers said.

"Most farmers, the crop that they're putting in the ground, they're having to borrow money to put it in the ground," Bowers said.

United Ag is a cooperative that is member-owned, stores crops and has hardware stores.

Any profit the cooperative makes goes back to its members, Bowers said. Customers deliver their crops to the grain elevator, where they are stored based on market conditions.

Some farmers will sell their crops to the elevator for the price they are worth at the time and others will put the crops in storage to sell at a later date, Bowers said.

"They're selling it to us and we're selling it to end users and resellers," she said.

High yields are not always good.

High yields in past years have contributed to low commodity prices, Bowers said.

"There's just a lot of corn locally and nationally" she said.

Other factors that contribute include the export market and demand, which is low right now.

In past years, farmers nationwide geared up to produce ethanol, but federal mandates never came through, Bowers said.

In recent years, United Ag has seen record numbers in yields and acreage planted, but grain acreage was 30 percent down this year.

The market and commodity prices are based on supply and demand, Sulak said.

"It's a cycle that repeats itself over and over," he said. "Corn gets expensive and everyone starts growing it because they know we can make money doing it. We overproduce. The more supply there is out there, the cheaper corn gets."

When Sulak began farming, prices were low, but started to pick up in 2012. Since then, prices hit a high level and have now bottomed out, he said.

"Bottoms last longer that the top," he said. "We've reached the bottom. It's probably going to stay at this level a couple more years before something happens in the supply chain to cause things to change."

The United States Department of Agriculture released a crop reduction report the second week of August. Bowers and many agriculturists expected national yields to be lower than they were because crop condition ratings have been bad in important and drought areas.

"This year they had lowered yields some, but not enough to where I personally think their crop is for this coming up year in the Midwest," she said. "The market did take a dip last week, and that was for the most part unexpected."

The future of crop commodity prices is unknown, Bowers said.

"In time things will adjust to fix themselves, but it's going to be a matter of if farmers can withstand waiting," she said.

The agriculture industry could lose farmers through this tough time, and Bowers saw farmers transition out of the field last year. This year isn't the first that the market was difficult for farmers to be profitable.

"You can't keep taking hits and come out ahead. A lot of farmers were geared up to take one bad year, but a lot aren't geared up to take multiple hits," she said. "We're hoping things would get better this year, and right now it's not looking like it's going to be that way short term at least. Long term, I hope it turns around."



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