The Daily Item, Sunbury, PA

February 25, 2013

Rosy forecasts don’t impress farmers

By Rick Dandes
The Daily Item

SUNBURY —  If crops recover from the severe drought that plagued much of the Midwest last summer, American farmers could realize their highest incomes in 40 years, U.S. government forecasters say.

Doug Klinger, a Selinsgrove-area farmer who controls more than 800 acres of farmland on which he grows soybeans, corn and other grains, said Friday he expects to have only a good year.

Prices for those commodities aren’t expected to be as high this year as last, when crop production worldwide was diminished by drought.

Corn is trading at about $6.875 a bushel on the Chicago Board of Trade, and has lost 19 percent from a record $8.49 in August as global supply concerns eased. Soybeans, trading at $13.84 a bushel, have tumbled into a bear market, losing more than 20 percent from last year’s closing high of $17.68.

“We can still make a nice profit at that current price level,” Klinger said. “But the reality is, you never know about the season. It’s so weather dependent. We can do everything right and then the weather doesn’t cooperate and a crop is wiped out. Or we can make a mistake, and because of great weather and less supply worldwide, we can have a great year.”

“It’s true,” said Mark O’Neill, a spokesman for the Pennsylvania Farm Bureau in Camp Hill. “Pennsylvania farmers rarely get excited about projected income based on forecasts before crops have even been planted.”

History and weather

Current economic forecasts for a good year are based on historical yield averages and do not take into account weather conditions.

“Certainly, farmers are hopeful that it will be a good year and that prices for corn and soybeans will be strong,” O’Neill said. “But if farmers don’t have good yields due to poor weather conditions or drought, they won’t be able to take advantage of favorable prices for their crops.”  

Meanwhile, projections for an outstanding year for farmers were also made in 2012, but those predictions were dampened by drought conditions across much of the nation, including the corn belt in the Midwest. In addition, the strong prices for corn and soybeans are not favorable for farmers who need to purchase those grains to feed their animals.

Feed costs play a key role in determining whether a livestock operation is profitable.  

“I believe this will be a good year for us, if the weather is good,” said Thomas Wyerling, owner of a farm near Beaver Springs.

Wyerling grows corn and soybeans. He closely watches the commodity market and said last year’s droughts in the Midwest, the problems in Brazil, Argentina and in Russia, helped bring on the record-high prices.

It’s not likely to happen again, he said.

“But prices are still fair, even though prices have dropped because a large crop is being planted this year in the U.S., 100 million acres of corn, 80 million acres, soybeans. And crop production in Brazil has improved, I understand.”

A unique region

But Pennsylvania agriculture is much more than corn and soybeans.

Aside from being the fifth largest dairy-producing state, Pennsylvania produces a wide variety of fruits and vegetables. It has the largest mushroom industry in the U.S., and a significant poultry and livestock industry. No one could have predicted that last year would be such a prosperous year for apple growers in southeast and southcentral Pennsylvania, but favorable weather resulted in an abundant crop. The success of apple growers in the commonwealth was also based on the fact that weather caused major losses to apple producers in Michigan and New York.

This year’s weather forecast is strikingly similar to ones made at this time last year.

Expectations of a record corn crop and a rebuilding in livestock herds were quickly replaced by record-high corn, soybean and wheat prices and a liquidation of animals because of tight margins.

Despite an optimistic outlook from the USDA, weather forecasters have warned that farmers and ranchers in the Midwest and West should brace for another round of hot, dry weather this year. More than half of the United States remains in a drought.

Conditions have improved in the eastern corn belt states of Ohio, Indiana and Illinois where most areas are no longer being hit by drought. The western corn belt, primarily Iowa, remains severely or extremely dry.