Based on average yields and costs, Corn Belt farmers would barely make money at the corn and soybean futures prices now offered for this year’s crops, says economist Gary Schnitkey of U-Illinois. “Given expected yields, prices need to be above $4.20 for corn and $10.25 for soybeans before working capital stabilizes on typical grain farms,” writes Schnitkey at farmdoc Daily. Futures prices, however, were $3.80 a bushel for corn and $9.75 for soybeans. At those levels, “financial deterioration will occur,” says Schnitkey, “with most of the deterioration initially occurring as reductions in working capital.”
Likely yields and prices will become clearer in August when crops are maturing and USDA makes its first estimate of the fall harvest that includes spot checks of thousands of fields. ” If prices are below the $4.20 corn and $10.25 soybean benchmarks, cost cutting will continue to be important to avoid continuing large losses to working capital in 2017,” said Schnitkey. “Surviving a continuing and extended period of low prices will require cutting costs.”