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Grain farmers seeing profits wither

November 14, 2008|By JOSHUA BOWMAN

WASHINGTON COUNTY -- Throughout much of 2008, as the housing market plummeted and energy prices soared, the farm industry remained one of the economy's few bright spots.

This summer, crops were trading at historically high prices.

As this year's harvest begins, however, grain farmers are watching their profits fall hard.

"My gosh, it's just gone down, down, down," said Jim Harp, a grain farmer who owns 2,800 acres of corn, soybeans, wheat and barley in Washington County.

Corn, wheat and soybean prices have dropped almost 50 percent in the last four months.

In July, a bushel of corn was trading for more than $7 on the Chicago Board of Trade. On Wednesday, a bushel of corn was trading for $3.70.

Soybeans have fallen from nearly $16 per bushel to less than $9 per bushel over the same period. Wheat prices have gone down from more than $8 per bushel to about $5 per bushel.

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Harp admits he's been lucky.

He was able to sell much of his fall harvest in advance earlier in the year, when grain prices still were high.

Harp said he contracted about half of this year's grain before the fall, but was weary of booking too much too early.

"If you get a drought and end up with half of what you sold, you still have to come up with the other half somehow," Harp said.

Jeff Semler, University of Maryland Cooperative Extension agent, said while some farmers such as Harp were able to sell crops in advance, this summer's high prices made it impossible for those farmers to unload too much.

"They probably weren't able to capture the top of the market because most buyers weren't looking then," Semler said.

In addition, the drop in grain prices will exacerbate losses for grain farmers who purchased seed and fertilizer in the spring, when those items were expensive due to high fuel prices.

"Those bills still have to be paid," Semler said. "Reduced income means reduced profits."

As tough as it is for grain sellers, however, low crop prices aren't all bad news.

Livestock farmers have been feeling the pinch of high feed costs for months, and the sudden drop in grain prices will reduce those costs.

"It's a good thing for me," said David Herbst, owner of Misty Meadows Farms in Ringgold.

Herbst said he buys about 20 to 30 tons of corn- and soybean-based feed every month for his dairy cows.

He said the increase in grain prices this summer coincided with a decline in milk prices, making it hard for him to cover expenses.

"Certainly, for these farmers, (the fall in grain prices has) been a welcome response," Semler said.

Semler added that some local farmers resisted buying grains in advance this summer in hopes that prices would come down.

He said crop prices usually fall at harvest time due to supply and demand, though they do not often drop as much as they have this year.

Harp said promises of large harvests from Midwestern farmers have contributed to the fall in grain prices as well. He expects prices to rise soon.

"As soon as the harvest pressure is over, I think they'll go up again," Harp said. "It's just one of those things."

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