Corn prices have fallen 30% in the past three months stirring fears that the U.S. agricultural economy could see its first slump in a decade, as optimal growing conditions across the Midwest are prompting expectations for a second consecutive bumper harvest. On the other side, the lower prices are proving beneficial to livestock producers, meatpackers, and ethanol producers, as well as consumers as global food prices declined for a third month in a row due to a drop in grain and vegetable oil prices. Lower commodity prices could also hold down prices of cereals, breads, cookies, and other grain and soy-based foods. But the fall in prices will cut incomes across the U.S. farm belt as corn prices decline well past the $4 per bushel needed for farmers to break even meaning that farmers will not be able to meet their costs for the first time since 2006. The trickle-down effect is already being seen. Farmland values in some regions are slipping and demand for farm equipment is down. The U.S. Department of Agriculture predicted in February that net U.S. farm income will decline 27% this year to $95.8 billion – the lowest since 2010. The 38% of U.S. farmers that rent their land will generally feel a greater impact from the falling prices than those farmers who own their land because of the lag-time in changes in rents compared to falling prices. Overall however, economists aren’t worried that we will see a crisis situation as we saw in the 1980’s because U.S. farmers are carrying relatively low debt and have built up cash reserves from the recent boom.
To receive relevant news stories with summaries provided by GAI Research & Insight, subscribe to Global AgDevelopments, our free weekly enhanced eNews service