SAN ANTONIO, Jan. 13, 2014 - An agricultural economist at Ohio State University has some words of caution for U.S. farmers.
“The last six years have been extraordinary years if you are a row crop producer,’’ Matthew Roberts told a workshop Monday at the American Farm Bureau Federation’s convention in San Antonio. But prices have fallen and “the next six years will not be like that,” he said.
Roberts, an associate professor at OSU’s Department of Agricultural, Environmental and Development Economics, is predicting a four-to-five year period of “lower costs and profitability.’’ And he advised farmers to “put one year’s worth of land charges (above normal working capital needs) in the bank as soon as possible.”
Roberts also had some more personal advice for young farmers, who he said may never have experienced hard times. Farmers should make sure they communicate with their spouses about their financial situations, he said, adding, “Don’t compound financial problems with divorce.”
Pushed by record prices for corn and soybeans, U.S. net farm income last year was estimated at about $131 billion, the highest in 40 years, once adjusted for inflation. Farmers responded to the surge in prices by planting a corn crop that USDA says will approach 14 billion bushels, the biggest ever, overwhelming increased corn crop demand for ethanol and livestock feed.
World production of row crops are also at record levels, as improving economic conditions in the poorer nations of the world caused a surge in demand for U.S. agricultural commodities.
“High prices give incentives to change behavior,’’ Roberts said. ``As a result, global corn, soybeans and wheat production have all increased substantially.”
Growing demand from China and ethanol producers caused changes in corn and soybean production patterns during the recent boom years in agriculture, he noted. Some of the acreage added to corn in the U.S. may revert back to pastures and forage, following last year’s bumper crop.
“The question is, how fast after a grower has made an investment into row crops, we’ll likely have to see losses before that land reverts to another use,” Roberts said, forecasting some bankruptcies among farmers who expanded aggressively in the Corn Belt.
"Cash is the only way to ultimately manage risk,’’ he added.
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