Expected record U.S. harvests this fall are driving corn and soybean prices ever lower, leading to a third consecutive year of farm income losses. The situation has farmers and lenders worried, according to those Wallaces Farmer talked to at the Iowa State Fair on Friday, August 12. That was the day USDA released its August crop report, the first official estimate of 2016 crop size, based on actual in-the-field observations.
Market analysts say corn prices at Iowa elevators, already now below $3 a bushel, could drop to $2.30 to $2.50 a bushel, levels farmers in Iowa haven’t seen in a decade. “We’re at all-time record yields, but with $3 corn, it doesn’t cover the breakeven cost,” says Brad Moeckly, a central Iowa corn, soybean and hog producer. “It’s a very stressful time in agriculture, just trying to make ends meet.”
Corn and soybean crops are expected to shatter records
Soybeans, now trading at about $9 a bushel in Iowa, could decline by another dollar or more, says Chad Hart, an ISU Extension ag economist. The latest crop size projections show farmers in the U.S. will harvest record corn and soybean crops. Corn growers are expected to harvest a record 15.2 billion bushels while soybean production would hit a record 4.06 billion bushels this fall.
If that much corn production is realized for the nation, it would be 11% more than was produced last year. The soybean crop would be up 3% from 2015. USDA is projecting a record-breaking U.S. average yield for corn at 175.1 bushels per acre and soybeans at 48.9 bushels per acre. USDA says average corn prices nationally for the 2016 crop could fall to as low as $2.85 a bushel; soybeans could drop to an $8.35 average.
Deeper downturn in farm income is weakening credit conditions
Although record yields are a point of pride for farmers, the big U.S. crop and overwhelming global supply of grain are hurting prices and farm income.
The deepening downturn in farm income is weakening farm credit conditions in Iowa, Illinois, Wisconsin, Indiana and Michigan, according to a Chicago Federal Reserve survey of ag lenders. “The credit situation is much weaker than it was a year ago,” says Kurt Herbrechtsmeyer, CEO at First Security Bank & Trust in Charles City. “Some farmers are entering their third year in a row of tough going. You can only dig so deep.”
Extending loan payments, restructuring debt, cutting financing
Farm lenders are restructuring debt and extending loan payments for more customers this year. Bankers are asking farmers for more collateral and some are seeking federal loan program guarantees for their higher-risk customers. Some lenders say they simply aren’t lending farmers as much money as they did the past two years. It’s difficult to tell people you aren’t going to finance them next year, but lenders did that last year and say they will do more in 2017.
“Iowa and U.S. farmers had a window of opportunity in May and June to lock in crop profits, or at least meet their cost of production. Corn prices climbed to over $4 a bushel and soybeans to over $10 a bushel,” points out Steve Johnson, an ISU Extension farm management specialist. Weather worries drove the mini-rally. However, weather in July turned out to be favorable for corn growth, corn pollination was good and the soybean crop continues to look good in mid-August.
Iowa is producing record corn harvest, second largest bean crop
USDA’s August 12 Crop Report estimate indicates Iowa farmers in 2016 will produce a record corn crop and their second largest soybean crop in history. USDA forecasts Iowa will produce 2.68 million bushels of corn and 550 million bushels of soybeans, narrowly missing last year’s all-time high for soybeans. Iowa’s average yields for 2016 are projected at 197 bushels per acre for corn and 57 bushels per acre for soybeans—both would be records if they are realized.
“Iowa set its record average corn yield last year with 192 bushels per acre and its record average soybean yield with 56.5,” notes Johnson. USDA will take another shot at its 2016 estimate by updating its August estimates. That update will come in its September Crop Report. USDA will update again in its October report. For the September report, USDA enumerators will be in the fields in late August, counting kernels and pods and updating the August Crop Report’s yield and crop size estimate. USDA will issue its September Crop Report estimates on September 12.
Other states also have big August yield estimates for 2016
When you see numbers like Iowa’s 2016 corn yield being estimated at 197 bushels per acre, Nebraska 187, Minnesota 184 and Illinois 200 bushels per acre, those are pretty big numbers for an August crop report estimate—the first in-the-field estimate of the year.
“Plan your harvest and your grain marketing accordingly,” advises Johnson. “All sorts of issues are facing us now with this big harvest looming and how the grain elevators, co-ops and farmers are going to handle a crop of this size. Also, keep in mind that this 2016 crop will be an early maturing crop. We’re going to start harvesting in September in much of Iowa. That is really going to put pressure on the basis, as the old crop corn crashes into the new crop corn.”