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Harvest Public Media is a reporting collaboration focused on issues of food, fuel and field. Based at KCUR in Kansas City, Harvest covers these agriculture-related topics through an expanding network of reporters and partner stations throughout the Midwest.Most Harvest Public Media stories begin with radio- regular reports are aired on member stations in the Midwest. But Harvest also explores issues through online analyses, television documentaries and features, podcasts, photography, video, blogs and social networking. They are committed to the highest journalistic standards. Click here to read their ethics standards.Harvest Public Media was launched in 2010 with the support of a grant from the Corporation for Public Broadcasting. Today, the collaboration is supported by CPB, the partner stations, and contributions from underwriters and individuals.Tri States Public Radio is an associate partner of Harvest Public Media. You can play an important role in helping Harvest Public Media and Tri States Public Radio improve our coverage of food, field and fuel issues by joining the Harvest Network. Learn more here.

Grain Glut Could Hurt Rural Economies, Keep Prices Low

Soybeans pile up at a grain elevator outside of Heartwell, Neb. Nationwide, farmers harvested record-breaking amounts of corn and soybeans in 2014.
(Grant Gerlock/Harvest Public Media)
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American farmers grew more corn and soybeans in 2014 than ever before, according to the U.S. Department of Agriculture’s latest crop production report.

 The glut has pushed grain prices to a five-year low, forcing some farmers in Midwestern states to operate on much tighter profit margins than in recent history. Some will even sell their crop for less than it cost to grow.

Scott Irwin, a professor of agricultural marketing at the University of Illinois, expects tighter farm budgets to ripple through farm country.

“Farmers will be reducing their purchases of farm machinery, potentially reducing their purchases of some crop inputs,” Irwin said. “These things can hurt agribusinesses like John Deere, machinery manufacturers, seed suppliers, fertilizer dealers, etc.”

The manufacturer Deere & Co., anticipating the monster harvest and corresponding price plummet, began laying off employees in August.

Irwin said newer farmers, who are likely to have less equity, are at higher risk of defaulting on their loans during this downturn, while the majority of farmers will be able to weather the storm because many saved money during recent, more prosperous years.

Why so much?

Recent prosperity is, in part, why grain farmers are facing such low prices now.

Corn and soybean prices began to climb in 2007 to levels far above the cost of production, thanks to the biofuel mandate, growing demand for livestock, and yield improvements, which created the economic incentive for farmers to plant more. Prices climbed even higher in 2012 because of severe drought in the corn belt.

The past two years, much of the Corn Belt saw excellent weather conditions during the growing season. The USDA’s most recent estimate, which is the agency’s most informed look at the 2014 harvest, shows farmers setting new records for average corn and soybean yields per acre. On average, farmers harvested 12.9 bushels more per acre of corn in 2014 than they did the previous year, and 3.8 bushels more per acre of soybeans.

In addition, farmers in countries such as Brazil have expanded their acreage of corn and soybeans.

All of this production began to outpace demand, causing prices to begin their downward trend in 2013.

What about the future?

The short-term outlook remains hazy.

Darrel Good, an agricultural economist and Irwin’s colleague at the University of Illinois, wrote in an email that the future of grain prices is debatable.

“There are differing opinions on long term price prospects. The USDA has projected a continuation of low prices,” he wrote. “We are more optimistic.”

Irwin agrees, for two reasons.

He believes grain producers will see a growing demand for their product from the federal government’s Renewable Fuels Standard (RFS).

In addition, he believes China’s economy will benefit from the drop in crude oil prices which will allow their hunger for meat to continue to grow, boosting their demand for soybean imports used in animal feed.