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Thursday, August 14, 2014

Low crop prices have some farmers opting to store product; prices hurting farm equipment sales

Record harvests that have led to an overabundance of crops such as corn, soybeans and wheat are causing prices to plummet and having a negative impact on other areas of agriculture, Roberto Ferdman reports for The Washington Post. With corn prices falling 35 percent, soybeans 13 percent and wheat 12 percent, overall crop revenue is expected to be down 12 percent this year, compared to a 3 percent decrease in 2013. U.S. crop sales will generate less than $190 billion this year, a $35 billion drop from 2012. (Post graphic)

That means that "U.S. farmer profits are expected to plummet by nearly 27 percent in 2014 after several years of historic highs, according to USDA estimates from earlier this year," Ferdman writes. And agriculture businesses are suffering. After years of sustained growth John Deere has reported a drop in sales in each quarter this year, with sales falling 6 percent in the third quarter and an expected drop of 8 percent in the fourth quarter. The company said it expects to sell even less equipment in 2015. Overall, industry-wide sales are down 6 percent this year.

One problem is that some farmers are either selling crops at prices that are too low to be profitable, or aren't willing to sell at the low prices, which means large portions of crops are going into storage, Ferdman writes. "Large stockpiles of corn today should give way to commensurately large cash piles of profit down the road, even if it means storing much of it until prices recover."

Gregory Ibendahl, associate professor of agricultural economics at Kansas State University, told Ferdman, "If you're a farmer facing continual low prices, you might have to take some land out of production. Somewhere along the line you might even reach a point where you have to go out of production." (Read more)

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