From the Ground Up: Growing the Crop is Only Part of the Job
Predictions of a rebound in corn production in the Midwest coupled with rising competition from Brazil, Argentina, Ukraine, and Russia, and a steady but static demand, along with the expected record supply of corn suggests that there will be significant downward price pressure at some point this spring or summer. For today’s farmer, growing the crop is only part of the job. Mark Welch is a Texas A&M AgriLife Extension Economist.
“Nobody knows what prices are going to do. I can’t predict that with any reliability at all, but what you can do is look at what the market is offering you today based on what you know and the likelihood of your level of production and try and make an assessment of, is that price good enough, whatever today’s price is, and that’s a decision you have to make every single day.”
Welch says that today’s farmer must have an astute understanding of what the cost is in a crop.
“That’s a changing number based on yields and inputs, but you’ve got a pretty good idea of what it takes to grow a bushel of corn or to raise a pound of beef. You’ve got a pretty good idea. If you don’t, you need to get and idea. I’ve had many producers say prices are down, say three fifty a bushel for corn, well I can’t grow corn for three fifty a bushel. That’s good to know.”
Welch points out that it’s never too early to start analyzing what the market is up to.
“Three weeks ago the price was four twenty a bushel. What were you doing then? Were you paying attention to what the market was offering at that point? Is there a margin that we can start trying to secure? Many times we hold out for that home run kind of price. We may get it. We may have another terrible year in this country or some other major producing country. Could we see five dollar corn? You bet. We have that kind of volatility.”
But Welch says that given the unknown situation of that level of predictive power, knowing what the price offer is today remains imperative.
“And just be a little better on cost, can you squeeze out a little more production, a little more yield, and can you do a little something on marketing, and do that this year and next year and the year after that. And I think that’s the key to not only profitability but sustainability in farming and agriculture today.”