(Bloomberg) -- Tim Gottschalk is misty-eyed as he describes the toughest year in his three decades of farming, facing heavy pressure from low crop prices, high seed and equipment costs and elevated interest rates.
“You have to figure out how to make it work,” he says during an evening meeting of the annual Pro Farmer Crop Tour in Bloomington, Illinois. “I’m the fifth generation and I’ve got the sixth and seventh coming,” he says of his family that will take on the farming operation.
Gottschalk, 52, is looking to save anywhere he can, trying to grow food-grade white corn after years ago switching to non-genetically modified corn and soybeans, which fetch a premium over commodity-grade crops. He feels sorry for equipment dealers seeing fewer sales in the down market. “Everybody is on the chopping block,” he says of the efforts to save on costs.
Bumper crops would seem like a blessing, but mega-harvests are bringing a host of challenges for American farmers, weighing on crop prices and leaving growers cutting back on everything from fertilizer to equipment. The US Department of Agriculture is projecting record-large US corn and soybean yields amid lackluster global demand. While the annual crop tour currently under way across the Farm Belt is projecting numbers slightly under the USDA’s, dozens of crop scouts are affirming outlooks for massive harvests.
Ample inventories have pushed soybean and corn futures to the lowest since 2020 last week. Wheat futures also hit a four-year low late last month, with production set to be 9% higher than the prior year. The result is that farmers’ incomes are heading for a 26% slide this year, the biggest drop since 2006.
“You have to stop spending your money foolishly,” said Steve Zavadil, a Nebraska farmer who planted 300 acres with corn and 250 acres with soybeans this season. “You can’t be going out and buying any new equipment all the time. We’ve just got to adjust.”
The crop tour, in which growers, traders, government statisticians and reporters fan out across the top corn- and soybean-producing US states to inspect fields, is putting a spotlight on the problems farmers must face.
While farm-machinery makers can lay off workers or sell businesses in lean times, grain growers’ best option usually is to maximize yields so they have more to sell even if prices are low. US farmers cut back on corn plantings this spring by 3% and boosted soybean sowings by the same amount. Timely rains and sunshine, with a relative lack of damaging heat during the peak growing season, were nearly ideal for crops.
“I suppose that’s just the way it is,” Zavadil said while observing scouts taking samples of his soybean and corn crops. “You know, big crop coming down the road, and everybody knows it — probably the best we’ve seen here.”
David Benes, who helps manage 8,000 acres of farmland in Nebraska, said he expects his corn harvest to average as much as 240 bushels per acre, which is below his own record but above the average for past years. With the exception of a two-week dry spell in July, it was “almost an ideal year” with “adequate to good precipitation levels,” Benes said.
And “you can still add weight to those kernels,” he said, leaving further room for yields to improve before the harvest.
Benes had locked in prices for roughly three-quarters of his upcoming crop — about 400,000 bushels — for an average above $4.80 per bushel, avoiding the worst of a selloff that sent prices plunging below $4 ahead of the harvest.
Even though grain prices have fallen, production and land costs remain elevated. Mike Berdo, a 43-year-old farmer in Iowa, bought his farmland two decades ago and said he would like to acquire more. But land prices have barely budged from record levels.
Storms in the Gulf of Mexico that swept into the Midwest are also causing headaches. They boosted plant growth, but also swept in pathogens that cause a corn disease called tar spot – evident by small, black spots on corn leaves. The fungus, if untreated, can kill corn plants, reducing potential yield. In places such as South Dakota, floods sometimes washed fertilizers away, leaving patches of exposed land, and many crops were damaged by hail storms.
But those issues are isolated enough that the broader market won’t likely react by driving up prices. Even with the fungus in an elevated number of corn fields in parts of the Midwest, plant health overall is strong, with the leaves of many corn plants still a dark green that should help produce plump, starchy kernels of grain in the final stretches of the growing season.
Crop yields aren’t up for everyone, though. Minnesota farmer Richard Guse estimates his corn yields will be 15% lower and soybeans down by 20% after an excessive amount of rain early in the growing season impeded crop development. Guse said plants are faring much better in parts of his fields with rain-collecting drainage, while just a few rows away, corn that got saturated has 60 fewer bushels per acre.
In response, he’s trimming back on farm inputs where possible, such as forgoing applications of fungal treatment and fertilizer injection known as side dressing — and storing unsold supplies in the hopes of a rally.
“In our neighborhood, hardly anyone put fungicide or side dressing down on the corn,” said Guse, also a scout on his 20th Pro Farmer Crop Tour. “We’re limiting our losses. Whatever happens, happens.”
©2024 Bloomberg L.P.
