Increased
Global Grain Production Means Lower Grain Prices for U.S. Growers
From
Sam Custer
OSU
Extension, Darke County
Thanks
to increased global grain production and lower domestic demand for
grain for ethanol, crop producers will find 2014 to be tougher than
the past few years and should prepare now for lower prices, an expert
from Ohio State University’s College of Food, Agricultural, and
Environmental Sciences said.
“Prices
reflect that we have moved from an era of scarcity to one of adequate
inventories and prices have responded by moving lower,” said Matt
Roberts, an Ohio State University Extension economist. OSU Extension
is the outreach arm of the college. “We are already seeing lower
prices come into the market, and unless U.S. or South American
acreage declines, those prices are likely to continue to move lower.
“The
prices we had earlier in the year aren’t guaranteed to return.”
Roberts
spoke Nov. 25 during the kickoff of the college’s 2013-2014
Agricultural Policy and Outlook series. The event initiated a series
of local meetings to be held statewide through the end of the year.
Dates and times for the meetings can be found at
http://go.osu.edu/2014outlook.
Darke
County will host two meetings on December 17. The meetings will be
at A Learning Place in Piqua at 11:30 a.m. and the second at MVCTC at
5:30 p.m. Registration forms for the two meetings can be downloaded
at http://darke.osu.edu/topics/agriculture-and-natural-resources.
Registration is due by December 10.
The
event featured presentations by experts from the college’s
Department of Agricultural, Environmental and Development Economics
(AEDE), who discussed issues the food and agricultural community
should expect in 2014, including policy changes and market behavior
with respect to farm, food and energy resources, and the environment.
Thanks
to several factors including no growth in ethanol demand and expanded
global crop acreage, markets are moving back toward matching supply
and demand, Roberts said.
Add
another year of 160 or more bushels per acre yields on corn and 42
bushels per acre soybean yields, and growers can expect to see even
lower prices that are well below the cost of production on land that
has been purchased or cash-rented in the past three to four years, he
said.
“Prices
will only return to profitable levels if supply declines due to
acreage leaving primary row crops or demand returns,” Roberts said.
“This will likely create a significant financial strain in
crop-growing areas.”
In
order to prepare for the impact of lower prices, farmers should build
a working capital cushion of a year to 1.5 years of land charges
above what they typically need to operate, he said.
Other
ways growers can prepare include:
• Avoiding
machinery and
building expenditures just to take advantage of section 179 is an
easy way to build capital
• Refinancing
any and all loans
and mortgages into 10-year fixed rates
• Holding
off buying land or
entering into multi-year leases
• Carefully
evaluating living
expenses
To
read Roberts’ entire policy brief for the conference series, visit:
http://go.osu.edu/YhJ.
For
more information about OSU Extension, Darke County, visit the Darke
County OSU Extension web site at www.darke.osu.edu, the OSU Extension
Darke County Facebook page or contact Sam Custer, at 937.548.5215.
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