Higher prices for corn and soybeans isn’t motivating Wyoming County grain farmer Scott Brown to expand his operation.
He hopes other farmers don’t think about getting bigger, either.
As the per bushel price for corn and soybeans topped a 5-year high in mid-January, farmers are realizing a financial gain after years of a depressed market. But they aren’t overly optimistic that the prices will continue to climb, or persist, and many are taking a cautious approach when it comes to planning for 2021.
Brown, who plants 1,000 acres of corn and soybeans in Lemon Township, has dealt with prices spikes before — in 2008 and 2012 — and watched it quickly subside. The same thing could happen this time, he said, if farmers hurry to take advantage of the higher prices and saturate the market with more acres of corn and soybeans.
“That’s what depresses the price. Typically, farmers making their living on the farm stay the course in times like this, and the smaller operations rush in with more acres,” said Brown, who also sells seed to farmers and has seen a slight increase in purchasing for 2021.
As of mid-January, the per bushel corn price reached $6.40 and soybeans hit $13.80, according to Lackawanna County farmer Keith Eckel, who grows 800 acres of corn and soybeans in Lackawanna, Wyoming and Luzerne counties. Those prices represent a 40% increase from what they were just six weeks prior, he said, and it will encourage additional production.
But how much remains to be seen.
“I don’t foresee it having a major impact in Northeastern Pennsylvania because prices were depressed for a long period of time. Those in the grain production business were challenged to be profitable, so I think they’re going to remain cautious going into 2021,” Eckel said.
He also believes any increase in additional grain acres will be subdued by the skyrocketing demand for locally-produced food, which began with the onset of the COVID-19 crisis last March.
“We have a lot of smaller acreages in this region, and consumers are putting a premium on locally-produced fruits and vegetables today. Because of that, some farmers will not shift more acres to grain while that demand for produce is so strong,” Eckel said.
As far as a cause for the current price spike, Eckel attributed it to global factors. Brazil and Argentina have been wrestling with drought and lower yields, he said, plus the U.S. corn surplus from 2019 wasn’t as high as projected.
One of the biggest influences on the current price is the pork industry in China, which was devastated by disease in 2018 and 2019. As China works to build back its pork industry, their need for corn and grain imports have increased.
“China has been an active buyer. I believe the chances favor stronger market conditions for U.S. corn and soybeans over the next couple of years, especially as you have other national economies recover from the COVID impact,” Eckel said.
Still, even though the corn and soybean price is strong, it doesn’t pave the way for a clear profit for farmers.
Keith Hilliard, who raises 400 acres of corn and 200 acres of soybeans in southern Luzerne County, said when the price of those commodities increases, it usually triggers a rise in other input costs, such as fertilizer.
To help protect against unforeseen fluctuations in the grain price, Hilliard also plants potatoes and raises hay to lessen the risk.
He also participates in forward-contracting for about half of his grain crop
— locking in the 2021 harvest at the current market price.
Still, even that move poses plenty of risk.
“This isn’t just a Pennsylvania issue. If the Midwest has a drought this year, that may cause our prices to rise even more. If you’re already locked in with a contract, you could end up being low,” Hilliard said. “That’s why I only forward contract half of my crop and can still benefit if prices do go up.”
The price of corn and soybeans has a ripple effect on other segments of agriculture as well.
According to Richard Cole, a grain marketing specialist with Perdue Agribusiness in Lancaster County, when grain prices rose in 2008, so did the cost of fertilizer, liquid nitrogen and even beef, poultry and pork which rely on corn and soybeans for feed.
Cole agreed that strong demand from China is the main driver with the current increase, but the most important indicator for producers is not the top end price for grain.
“The base price, or floor, for corn and soybeans is going to be raised because of worldwide demand,” he said. “For our producers, that’s what we’re hoping for because that brings stability. A high ceiling price encourages extra production, which isn’t good for stability.”
And right now, higher grain prices have caused destabilization in other segments of agriculture.
Eckel said the cost of production — mainly feed — has risen significantly for beef, pork, dairy and poultry producers even since grain prices jumped by 40% over a 50-day period, beginning at the end of 2020. In the end, it bodes for a difficult time for the livestock industry and could cause meat prices to rise in the store for consumers.
“There’s a lot of uncertainty right now across all sectors,” Eckel said. “We don’t even know what the weather will be like this year, and that could impact the grain harvest and prices even more. The only thing that’s certain with farming is the uncertainty of production.”
That’s why Brown is somewhat uneasy by the current grain price increase and the potential fluctuations that could be made more drastic. A higher ceiling on grain means there is more room to drop, he added.
“I don’t see the prices staying like this. They’re a little bit higher than what we need to keep the market stable,” Brown said. “As a producer, I’d rather see a stable price than a high price.”