Rise in Crop Prices Affecting Farmers

Recent reports show that corn prices have collapsed over the past three years, falling over 120%. Oat, soybean, and wheat prices have also dropped tremendously, according to the United States Department of Agriculture.

Many farmers believe there are still things that can be done to turn the industry around.

“There are always tweaks to the system,” Tom Vilsack, USDA Agriculture Secretary said. “I think we still have to give some farmers some flexibility in terms of the counties they select from an administrative standpoint. I think in a new program you have to have enough flexibility when someone realizes they may have made a mistake about which county they designated.”

According to Seeking Alpha, farmers are currently strapped for cash and the decrease in agricultural prices could worsen the overall crop supply.

These low crop prices are going to lead to an increase in farm payments. Vilsack is optimistic but believes the market will continue to struggle.

“The market this time of year is really just on hold,” Vilsack said. “Just seeing a setback here just with the weaker cut out just in the last few days.”

Despite these agricultural issues facing farmers, the real estate value of farming land in the United States totals to approximately $2 trillion.

Farmers are still increasing production despite all the low prices. Some believe that this suggests underlying cash problems for individual farmers.

Farm debt that is not involving real estate grew more than 10% CAGR over the past three years, previously only increasing 3% over a 30-year period.

These low crop prices are also decreasing insurance returns for farmers. In Iowa, for the 2016 crop, producing a bushel of corn costs $4.15, and soybeans are currently worth more than $10.

Chad Hart, an extension economist at Iowa State University, said, “Crop insurance shouldn’t be set up to guarantee that everyone should continue to farm. The idea is farming is still a business and that means people both come into the business but also exit out of the business.”

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