When market prices for agricultural commodities skyrocketed to record highs in 2008, so did prices for inputs such as fertilizer, fuel and seed.
This year, prices for corn, soybeans and wheat are almost half what they were last year. But as commodity prices fell, input costs didn’t follow proportionately, said Jonah Bowles, agriculture market analyst for the Virginia Farm Bureau Federation.
“Input costs are still high, and profit margins are narrow,” he said. A year ago, corn traded at more than $7 a bushel; wheat was easily more than $10; and soybeans were almost $16.
Farmers planted a record corn crop because of the increased demand due to the government mandate to blend ethanol. Since then, however, the demand for corn has not kept up with the supply. Some ethanol plants have shut down or declared bankruptcy, and the livestock industry has been hurt by exorbitant feed costs, Bowles said. So far this year, $7 corn could end up trading for less than $3, and wheat could sell for $4 to $5 in the cash market.
However, all is not gloom and doom. “Even though prices are much lower than last year, they’re not as low as three or four years ago,” Bowles said. Farmers are used to fluctuations in the marketplace. “When prices are very high, they know it won’t last; and when prices are very low, they know it won’t last.”
Some farmers are tired of the volatile, unpredictable market and have thrown in the towel. Virginia in recent years has lost an average 104,000 acres of farmland annually. “We ask a lot of our farmers, but they always respond,” Bowles said. “We have to do our part to support them and keep our domestic agricultural industry healthy. “That’s the only way we can ensure a safe and nutritious food supply in the United States.”