The bad news of a bountiful harvest

“Record crop yields are expected again throughout Minnesota in 2016 as farmers close in on the final days of fall harvest,” the Le Sueur News-Herald reports today.

Viewed from the city slicker perspective, this is great news. A bountiful harvest! Bring on Thanksgiving!

It’s the second time in three years of record crops for corn and soybeans against the occasional news stories that indicated times were tough for farmers because it was too wet or too dry or too hot. The end result? A record harvest.

There are exceptions.

“An auction sale in March is a real possibility,” owner Jack Hedin, who founded an organic farm in 1997 and is losing money on the farm the old-fashioned way. “This was our worst year ever. It was a catastrophe. It looked like a nuclear wasteland, some of these fields.”

Steady rain over the summer has wiped the farm out, according to the Winona Daily News.

Understanding the farm economy is beyond the ability of mere mortals.

The bountiful harvest apparently means many farmers will struggle.

But despite the record production, the University of Minnesota Extension Service notes farm income is expected to dip due to low commodity prices for corn and soybeans.

Corn was at $2.84 per bushel at United Farmers Coop (delivered Nov. 16) and soybeans were set at $9.01 per bushel. At Traverse Elevator in rural St. Peter, bid prices for Nov. 30 were a bit higher, at $2.88 for corn and $9.11.

The break-even price for farmers growing corn is $4 per bushel. And so, as the Star Tribune reported last week, farmers tighten their belts in a bountiful harvest.

In a report earlier this year, the University of Minnesota’s Center for Farm Financial Management reported that despite record crop yields in 2015, net income for Minnesota farms continued to decline that year to the lowest point in 20 years in inflation-adjusted dollars. The study analyzed data from nearly 2,200 crop and livestock farms included in a database representing a broad cross-section of Minnesota production agriculture.

Of those, crop farmers saw slightly higher earnings because of the record yields in 2015, the report said, but incomes remained low by historical standards.

Part of the problem is oil prices are low so the effort to inflate the price of corn by creating a demand for ethanol — and therefore corn — has stalled.

In short: There’s too much of what farmers grow. What’s good news for many of the rest of us is bad news for agriculture.

Energy prices will have to go up. Record and bountiful harvests will have to go down.

How does any mortal make sense of that?

Related: Selling the farm not as easy as it sounds (Rochester Post Bulletin)

  • Jerry

    It’s pretty basic economics. If demand stays constant while supplies increase, price goes down. Unless the price of inputs goes down at the same rate, farmers are going to be hurting. It’s the same in any industry.

    • Well, of course, and that’s the insanity. Good is bad and bad is good in the farm economy.

      “We all do well when we all do well” doesn’t work in that economy. Which brings up the question: Does it work in ANY economy or do we need people to fail in order for others to succeed?

      • MrE85

        They don’t call economics “the dismal science” for nothing.

      • wjc

        I guess it depends on what you mean by “does it work”. It doesn’t work for the farmers, but the price of cheap, crappy, corn-based food is lower for consumers, so it works for some people.

        Compare to the businesses who supply products for Walmart. If a company sells 75% of their output to Walmart (and some do) and Walmart decides that they want to pay 20 cents less per unit, the supplier is kinda screwed. It works for the people who get the Walmart price cut though, or it works for Walmart if the cut is not passed to customers.

        So bottom-line, every business circumstance that doesn’t work for one group of people probably works to a greater or lesser degree for another. “We all do well…” is a myth for the most part.

      • Jerry

        I think it is the same for all commodities markets, especially those with many divided suppliers and few buyers.

      • Postal Customer

        “Does it work in ANY economy or do we need people to fail in order for others to succeed?”

        I have often wondered this. Hillary kept saying she wanted everyone to “get ahead.” Is that even economically possible? Or do you have to be stepping on someone to do it?

  • MrE85

    It’s not as hard to make sense of the situation as you might expect. Over the weekend, TPT repeated the Ken Burn’s “Dust Bowl” series. One of the things that made the “Dirty 30s” so tough on farmers was the fact that the southern plains had produced bumper crops in the years before the drought/heat wave. The huge yields caused the price of wheat to drop. Farmers, trying to make of the lost income, responded in the only way they knew how, by planting more acres in wheat, hoping to make up in volume what they had lost in value. The result was a record-shattering crop that made prices drop even further. You know what happened next…

    Farmers have no direct control of the price they get for their products — in the same way that oil’s price is set on the global market, so it is with grain, dairy, meats.

    There is still plenty of demand (and use) for ethanol. As the economy has improved, the amount of gasoline consumed by Americans has inched up again — and most of this gasoline contains ethanol. There are also several other ethanol blends that are cheaper than gasoline and are selling pretty well, at least here in Minnesota. It is generally true that when gas prices are low, sales of E85 go down.

    Yes, farmers can sell their corn to ethanol plants, but there will get the same low price as if they sold directly to a feed company. Today, many ethanol plants create fuel (both ethanol and biodiesel), animal feed and the gas that makes our soda pop.

    The last time corn prices were really high, it was because farmers in other parts of the country had suffered a setback in their yields. While no one wishes ill on another, that’s just the way the market works.

    • Matthew

      Hello MrE85, what do you know about E10 and E15 in newer, non-flex-fuel vehicles (like 2010 and newer)? I seem to remember hearing that it was ok for newer vehicles, but I can’t find any good sources, and am also paranoid that the dealership won’t honor the warranty if used with E15. Got any good reading material? Thanks much.

      • Moffitt

        Here is a US Department of Energy site you can trust: http://www.afdc.energy.gov/fuels/ethanol_e15.html

        Don’t worry about the warranty — the EPA is the final word on which fuels are approved to use in the USA. I use the stuff myself in my gas-burner.

        Here’s a local site with some more info:

        http://mnfuels.com/

        • Matthew

          Thanks Moffitt. I am in MN so you’re right about the E10.

          • Moffitt

            BTW, Moffitt = MrE85. Like Satan, I have many names.

      • Moffitt

        If you are buying gas in MN, you are likely already using E10. It’s in all the grades, unless specifically marked — and then it is more expensive.

      • rusty hesson

        The E.P.A. Has no say about vehicle warranties. Many newer vehicles are not warranted for higher then E10.So it’s not a good idea to use higher blends.

        • Matthew

          Thanks Rusty, this is why I asked. I’ll stick with E10 until my warranty is up. I wonder if there’s been any actual research about engine damage resulting from E15.

          • rusty hesson

            I’ve don’t know of any damage done to “Automobile engines ” .But definitely stay away from E30-40

          • 19kilo

            I have read that there’s been more testing done on e15 then any other fuel

            In Brazil they use e 27 minumum

      • 19kilo

        I have been using e 30 in my 2004 and my 2008 for 3 years if It is available

  • jon

    Not a record crop this year in my garden…

    We were well below record state… tomatoes we planted didn’t produce, and the ones that came up on their own later in the year never ripened (lots of green salsa at my house)

    Pumpkin crop was lower than previous years we’ve done pumpkins, and the carrots, while much larger were also much less numerous…
    Green beans got eaten by a rabbit…

    Zucchini, produced a lot… as usual…but raspberries and apples were both small and not particularly appealing this year’s, blueberry crop was light also…

    All told we are down over 45% (by weight) from last year… second worst year since I started keeping track…. (2013)

    • MrE85

      If you sold your produce rather than eat it, and the prices were established by a third party, in part on the scarcity and demand for fruits and vegetables, you may have had a pretty good year after all.

      • jon

        from what I read above… probably not… I would have both a failed crop and low prices… probably would have run my ~500 sq. ft. farm out of business.

    • Kassie

      We had a bumper crop of tomatoes, but all small. We learned our lesson on cucumbers too, which is to never plant them since they take over and produce more than anyone can eat. We’ve got 12 pints of not great pickles now and like 5 gallons of frozen cherry tomatoes.

      • jon

        A plan for preserving things is a must.

        I don’t do cucumbers/pickles because my wife doesn’t eat them… though I did get to turn some of our zuchini into pickles this year…. (we also did salsa, pineapple zucchini, and relish, along with other fresh uses for the stuff)

        But every year we are overwhelmed with zucchini, we only ever put in one plant, but we keep finding uses for it, so we keep growing it.

        Green beans are kind of a pain too because they don’t keep fresh, have to freeze them right away… at least carrots we can leave in the ground until we are ready to deal with them…. pumpkins keeps for a few months on their own also so we usually process the into jars when it gets cold outside…

        • Kassie

          This was our first year in our house, so a first year of a proper garden. We are already working to reduce the garden space because we had way too much and much just ended up being weeds when the rabbits ate all the corn we planted. We learned a lot of lessons including no cucumbers ever and eggplant is great.

          • This was a horrible for me with the rabbits. They were eating things they never ate before — various flowers and such that they’d never touched.

          • rallysocks

            Our neck of the woods has been like “Night of the Lepus.” Tons of the buggers and they were quite cheeky and bold. They didn’t eat people, but they sure laid waste to many veggie and flower gardens.

          • Moffitt

            I’m telling you, 2016 just sucks.

          • Anna

            I think I remember the Supreme Court ruling a BB gun is not a weapon. They work great for squirrels and my guess is they would work for rabbits, too.

            Rabbit stew is delicious. Tastes similar to chicken.

            It’s a thought.

        • John

          pro tip: Pickled Green Beans are amazing!

          • jon

            I really don’t like running a water bath canner in the middle of summer, and while I could pressure can the green beans, and not heat/steam the house up as much I much prefer freezing and vacuum sealing them.

            Also haven’t been a fan of pickled green beans the few times I’ve had them…

          • John

            I like them when pickled with a lot of dill, garlic, and hot peppers. . .

            Maybe I just like garlic and peppers.

  • DJ Wambeke

    The break-even price of $4/bushel corn would likely be for an average yield. If a farmer has a higher yield than normal (like this year) they still potentially could be profitable at a price even lower than that, because a lot of the input costs (rent, fertilizer, gas, seed, etc) are going to be the same no matter if the yield is high or low. (With a higher yield you obviously get more bushels to sell, even if they are worth less per bushel.)

    That said, a lot is going to depend upon individual specifics (location, location, location! – a lot of farmers in MN have a lot of drowned out areas; others got lucky and have very little damage of that sort) – how well/poor someone fares this year is going to vary quite a bit. $2.84/bushel might be a hard slog for most to be profitable at, however.

  • Gary F

    And if Trump can convince the House and Senate into an international trade war, then farmers are really screwed, The world will just buy less from us.

    • Tim

      A trade war will be the *least* of their problems, if there isn’t anyone around to harvest the crops and they rot in the field (or meat can’t be processed, etc)…

  • rusty hesson

    If only farmers weren’t so greedy they would cut back on production. And raise prices.

  • Andy

    The saddest thing about this post is not that farmers, in general, will suffer this year. It’s that the one farmer you mentioned that is growing actual food that actual humans can and do actually eat is really struggling and he’ll get no help from the government or insurance because he’s a small operation and he grows organically. If you’ve ever had any of Jack Hedin’s produce (Featherstone Farms), you know he and his crew grow amazing food (not commodities), especially his carrots, which for the past two winters have been the best tasting carrots of my life. Now I know why I haven’t been seeing them at my coop this fall.

    Our corporate food production system is broken. All farmers will suffer, some more than others. Eventually, we’ll all suffer because none of us can survive solely on a bumper crop of commodity corn or commodity soybeans. The fact that he (and the other farms like his in southern MN and WI) get scant, if any, mention in the media is only further proof that our corporate agribusiness system is a failure when it comes to providing us with food and farmers with a living.