A few years ago, a television drug advertisement pointed out how life often comes in twos.
Paraphrasing this, an Alabama Extension economist says farm profitability typically comes in thirds.
“At any given time, about a third of farmers are making money, a third are breaking even, while the remaining third are not turning a profit,” says Max Runge, an Alabama Cooperative Extension System agricultural economist.
Runge formulated this view after being challenged a few weeks ago by a reporter’s passing question about whether farming was profitable.
He remembers being taken aback by the question and temporarily left at a loss for words.
Runge says it is a great question — an obvious question — but one that had never been asked during his long tenure as a farm economist.
The question prompted some deep thought on his part.
After thinking about it, Runge says the Alabama’s farming landscape could be compared to a kaleidoscope, one that always changes colors and shapes and that is more subject to market and weather fluctuations than farm sectors in other parts of the country.
How most producers fare from year to year boils down to the types of crops they raise, where they live and how well they deal with unexpected events such as weather and economic factors.
As a state that stretches from the mountains to the sea, Alabama possesses several different climatic regions — another big factor in how farm fortunes play out year after year.
Runge says the 2011 crop served as case in point of how this kaleidoscope constantly changed, how unanticipated events work to the advantage of some segments of Alabama farming sectors and to the distinct disadvantage of others.
“The Wiregrass in southeast Alabama reeled from drought, a factor complicated by equally severe droughts in Texas and Oklahoma,” “We typically aren’t affected by what happens in these two states, but last year severe drought forced a sell-off of huge numbers of cattle. What remained placed a heavy demand on hay supplies, driving up hay costs in Alabama and the Southeast in general.”
Good commodity prices, scorching drought
For southeast Alabama row-crop producers, the 2011 crop year was fraught with irony — good commodity prices but little to sell due to the effects of scorching drought.
Meanwhile, in the geographic opposite end of Alabama, northwest row-crop producers fared considerably better. “Growing conditions were good, prices were fair — not exactly a record year but a good one,” Runge says.
Only a few months later, as Alabama producers entered the 2012 crop year, conditions had changed decidedly for the better.
While input costs had climbed, cattle producers were still enjoying exceptionally good prices. Meanwhile Alabama row-crop producers were anticipating good prices for most commodities. Spring planting conditions were optimal throughout the state.
Then drought conditions set in, and fields and cropland began drying up, so did the optimism of the state’s row-crop producers.
Conditions were even worse in the Midwest, which worked to drive soybean and corn prices higher.
Then, the kaleidoscope went another turn and conditions changed for the better throughout much of Alabama. “As harvest rolled around, corn and soybean yields were not as bad as expected, and while prices went down, they still ended up at good levels,” Runge says.
Some irony was mixed in too.
Runge says Alabama producers can expect record yields for soybeans, cotton and peanuts, though prices turned out to be a mixed bag — good for corn and soybeans, though not so good for peanuts and cotton.
Another factor that contributes significantly to this kaleidoscopic effect in Alabama is that row-crop producers don’t produce enough to affect national commodity prices. Consequently, they’re at the mercy of conditions in the rest of the nation, primarily the Midwest, which dominates corn and soybean production.
“It really is a different picture in the Midwest than other parts of the country,” Runge says. “Land productivity is much higher and the farm economy is less diversified and, consequently, less prone to this kaleidoscopic effect common in Alabama.”
Runge says he was reminded of this recently following a conversation with a Midwestern row-crop producer.
“He talked about his good three- to four-year run and how he felt for farmers in the Southeast who deal with all these wild cards,” Runge says. “He sees farming in the Southeast as quite a challenge compared to where he’s from.”