Crops plentiful for farmers this fall, profits not so much

HALSTEAD — The immense golden-yellow mound at the east-side Farmers Co-op elevator fills a shed the size of a football field to a height of 40 feet, perhaps a third full.

The Kansas corn harvest is more than two weeks old and it’s clear that the farmers of southern Harvey and northern Sedgwick counties will have no trouble filling the building to its 1.4 million bushel capacity.

The state’s corn harvest is expected to be above average, projected in August by the U.S. Department of Agriculture at 544 million bushels, up 7 percent over last year, with an average yield of 145 bushels per acre. An updated projection is due out Thursday.

Jack Queen, general manager of the Farmers’ Co-op in Halstead, said farmers in his area are telling him they have cut 80 to 110 bushels per acre for non-irrigated corn and expect to cut 180 to 250 bushels per acre for irrigated corn.

“It’s been a pretty good year,” he said.

The state is still in the midst of a drought, but not nearly as severe as it was at the end of the spring, when the wheat crop shriveled up. The state is basically back to where it was, rainfall-wise, at the beginning of the year.

But excitement about the corn harvest is dimmed considerably by the fact that corn prices keep falling, and are now trading below $3.50 per bushel. That’s the lowest level in four years and, more significantly, below the cost of production.

Farmers who switched this spring from corn to soybeans are probably feeling pretty smart, because while the price of soybeans is down considerably, it’s still profitable.

The soybeans and grain sorghum won’t be harvested until October and November, but the projection is that the soybean harvest will be up 18 percent, while the grain sorghum harvest will be down 7 percent. With falling prices, grain sorghum is even less profitable than corn.

Farmer Rex Carmichael, who farms on the Harvey-Sedgwick county line, was plowing the stalks from his non-irrigated corn field back into the dirt earlier this week, and getting ready to cut his irrigated fields.

The crop has done pretty well, this year, he said. He’s expecting higher yields than last year, but that won’t compensate for the lower price in generating income.

“The worst thing about the corn harvest is the price,” he said.

The squeeze

That’s the big problem: the price on grain has fallen drastically in the last four months making it unprofitable for many farmers.

When adding in the cost of land rental, the cost of producing corn exceeds the price farmers can get for it, said Dan O’Brien, an agricultural economist with the Kansas State University Agricultural Extension Service.

For non-irrigated corn, he estimated the all-included production cost, including land rental, at $3.90 to $4.35 per bushel. For irrigated corn, he estimates the cost at $3.85 to $3.96 per bushel.

The cash price for corn on Wednesday at the Farmers Co-operative Elevator in Garden Plain was $3.15 per bushel, a loss of 75 cents to $1 a bushel.

“For anybody who doesn’t own their land, they’re growing corn below the cost of production,” O’Brien said.

Grain sorghum is even worse. He estimates the all-included cost of producing grain sorghum in south central Kansas this year at $4 to $4.20 per bushel.

The price in Garden Plain was $3.05 per bushel.

“If you’re on the buying side, you don’t have a lot of fear right now,” O’Brien said. “You may even be inclined to wait, just to see how low it can go. But it won’t last forever.”

He said that last year, there was an expectation that prices would drop, but new buyers attracted by the low prices bought up much of the excess. Year-end inventory was about a third lower than originally expected.

“You know what they say,” O’Brien said. “The cure for low prices is low prices.”

Soybeans, on the other hand, are still profitable, if barely, he said.

The cost for non-irrigated soybeans was between $8.25 and $9.50 on yields of 31 to 39 bushels per acre. For irrigated soybeans, the cost is $9.37 to $9.65 per bushel on 61 to 66 bushels per acre.

The cash price for soybeans in Garden Plain was $9.78.

Falling crop prices

The fall in prices is stirring action on both the micro and macro scale.

O’Brien said a lot of farm rental agreements will probably be renegotiated this fall and winter when harvest is over. The cost of farm land, which has risen dramatically in the last five years to historic highs, is a key to driving the high cost of production.

“Right now, they are just getting every bushel they can,” O’Brien said. “Then the tenants and the landlords will sit to talk about profitability and what works for both.”

It will also mean farmers switching acres around to more profitable crops, particularly switching corn and grain sorghum fields to soybeans, he said.

On a global scale, the glut of corn and the low prices will attract all sorts of buyers, said Greg Krissek, CEO of the Kansas Corn Growers Association.

His job is to find new buyers and uses for the state’s corn.

There are three major markets for expanded consumption, he said: livestock, ethanol and exporting. All three will be interested in the low prices, he said.

“We have an extreme focus on market development, right now, because we have a lot of corn,” he said.

This story was originally published September 10, 2014 at 3:00 AM with the headline "Crops plentiful for farmers this fall, profits not so much."