CHICAGO (Reuters) - U.S. corn farmers are facing steep losses this year as prices collapse to the lowest in more than a decade after they had purchased seeds and fertilizers and started planting the second-biggest crop since the Great Depression.
At the same time, demand for corn in the world’s largest producer has plummeted with the collapse of the biofuel market, normally the destination of over a third of U.S. corn, as residents stay home during the coronavirus pandemic.
The price slump portends another year of financial hardship for farmers who have seen their income sink 22% during the past seven years as supplies burgeoned and demand sunk. The mountain of corn will likely drag on the rural economy even as farmers seed their crops next spring.
It is a cruel twist for farmers who had hoped to make money in 2020 after a U.S.-China trade deal promising many more exports - including corn - was signed in January.
“We thought there was light at the end of the tunnel,” said Rich Guebert, 68, a farmer near Ellis Grove, Illinois. “Then corona came in and reared its ugly head.”
Chicago Board of Trade December corn futures CZ0, which track the crop that growers will harvest this fall, have fallen about 17% so far this year. Without an unexpected weather event like last year’s dramatic floods, prices may fall further.
“We can’t raise corn at that price,” said Roger Hadley, a farmer in Woodburn, Indiana. “All farmers raising corn will be in the red.”
Seeding corn in Allen County, Indiana, where Hadley farms, will cost about $606 per acre, based on crop budgets and land rent estimates calculated by Purdue University. At the current cash price of around $3 per bushel, farmers in that area would have to produce a yield of 202 bushels per acre to break even -surpassing the county’s record of 185.8 in 2014.
Ted Seifried, chief ag market strategist for Zaner Group in Chicago, said that growers in many areas will be faced with prices of less than $3 per bushel by harvest, a level they have not seen since 2009.
Hadley, who plans to devote about half of his 1,000 acres to corn, said the only chance of turning a profit is to sell to grain elevators in the coming months at the slightest uptick in prices, before harvesting starts in September and grain floods the market.
The U.S. Agriculture Department’s closely watched monthly supply and demand report on Tuesday was expected to show domestic corn stocks rising to 2.224 billion bushels by Sept. 1, according to a Reuters poll. That is up 132 million bushels from the government’s April outlook.
The poll also showed that the nation’s corn stockpile would likely swell to 3.389 billion bushels by Sept. 1, 2021, buoyed by the harvest of 97 million acres that farmers are currently seeding. That would be the largest domestic corn supply since 1988 and the fourth biggest ever.
China already has committed to buying 1.252 million tonnes of corn in the current marketing year to which would be the biggest yearly total in six years, according to USDA data. But future purchases are uncertain as U.S. President Donald Trump sharpens his rhetoric about China’s handling of coronavirus.
Now farmers may be dependent on government safety nets for the third year in a row.
Grain growers are set to receive $3.9 billion in direct payments from the U.S. government’s coronavirus relief program, although details of the plan have not yet been released. That follows $28 billion the USDA has paid out to farmers during the past two years to weather the administration’s trade wars.”You hope for either a bigger yield so you can make money that way or just hope that Trump throws more money at you,” an Ohio farmer who declined to be named said. “That’s farming in America right now.”
Reporting by Mark Weinraub; Editing by Caroline Stauffer and Marguerita Choy