Iowa farmers are harvesting bigger than expected corn and soybean crops this fall. But grain prices have fallen considerably over the past couple of weeks adding to the economic uncertainty for farmers.
The government raised its forecast of how much corn and beans will be produced—providing some relief to livestock producers, ethanol plants, biodiesel plants and other grain users hit with higher corn and bean prices this year. USDA estimated on October 10 that farmers nationwide will harvest 12.2 billion bushels of corn, 1% above last month's projection. USDA raised its estimate of the average U.S. corn yield by 1.7 bushels to 154 bushels per acre—which would be the second highest yield on record.
Soybean production is projected at 2.983 billion bushels for the U.S. in 2008. In spite of slightly lowered yield per acre, the total number of soybean acres is larger than previously estimated. Thus, corn yields this year are generally higher than expected, while bean yields are a little less than expected.
Better corn yields than anticipated
One major reason for the improvement shown in the October Crop Report is that Iowa's crop is in better shape than USDA thought in September. Iowa's estimated average corn yield was raised from 168 to 172 bushels per acre on October 10—one bushel better than last year. "The relief is that we've got a crop—the crop did come through a lot of challenges this year,' says Iowa State University Extension economist Chad Hart.
Spring flooding washed out crops in many fields and areas of fields, leaving Iowa farmers worried that they may not be able to grow sufficient corn and soybeans to supply global needs for food , feed and biofuel production. Many farmers couldn't get corn and soybeans planted or replanted until the middle to the end of June, well past the normal planting date.
"However, we had really good weather in late August and in September to bring the crop along and put the finishing touches on yields, so its going to be a better harvest than I expected," says Jerry Main, who farms 650 acres near Fairfield in southeast Iowa. He didn't get all of his soybeans planted until July 1, and had some land that flooded so much he didn't get it planted at all.
Prices slip below cost of production
John Heisdorffer is a soybean grower from Keota and president of the Iowa Soybean Association . "The larger crops and lower prices we're now seeing present yet another challenge in what has been an extremely challenging year for farmers," he says. "We would expect the markets to respond with a price decline to this report, but no one anticipated the impact of the current credit crisis. With farm input prices at an all-time high, today's corn and soybean prices are well below farmers' cost of production because we have not seen the same reduction in major inputs such as fertilizer, seed, fuel and land rent."
Ron Heck, who farms near Perry, says "The USDA October Crop Report confirms that we have the soybeans to supply our customers' needs," says Heck. "Now we need a resolution to the credit crisis so our customers can obtain the credit they need to buy the soybeans and soybean products. If that situation can be resolved, price levels can be restored."
Two states produce one-third of U.S. corn
Illinois' estimated yield was raised from 172 to 177 bushels per acre in the October Report. Together, the two states of Iowa and Illinois are expected to produce 4.3 billion bushels, well over one-third of the nation's total crop. Nebraska and Minnesota yields are both up four bushels.
USDA raised its forecast for U.S. soybean production by 2% primarily because agency analysts had previously underestimated the acreage. USDA says Iowa farmers will harvest 9.8 million acres or 500,000 more than the September soybean estimate.
Corn and soybean prices rose sharply in June but have fallen dramatically in past few weeks as the economy has slowed and harvest forecasts have improved.
Profit margin disappears for farmers
After the USDA October Crop Report was released October 10, the price of corn for December delivery dropped 30 cents to $4.08 per bushel on the Chicago Board of Trade. Prices had reached nearly $8 in late June. November beans fell 70 cents to $9.10 a bushel.
USDA is estimating that this year's corn crop will bring farmers about $4.70 a bushel, 80 cents less than USDA forecast in September. The estimated soybean price for was lowered by $2 a bushel as a result of the October 10 Crop Report.
Citing the economic slowdown, USDA trimmed its estimate of the part of the U.S. corn crop this year that will go into ethanol production by 100 million bushels—to 4 billion bushels. The Renewable Fuels Association issued a press release saying the higher crop estimates show that farmers can produce a sufficient amount of grain for food as well as fuel.
The drop in grain prices, however, has farmers fearing they'll be unable to cover rising production costs next year. Land rents are up sharply, as are costs of fertilizer and seed. Dave Nelson, a Belmond farmer, says seed prices alone could be 30% higher than last fall, and landlords have demanded higher rent. "Right now we can't make any money at these prices," he says.