Corn Price Bump Needed

Corn Price Bump Needed

Posted: Updated:

May 18, 2016

Story by Todd Gleason and provided by the University of Illinois.

Grain farmers throughout the Midwest are suffering through a third straight year of losses and prices don't look to go high enough to stabilize net incomes. A University of Illinois study suggests the cash price of corn needs to be $4.20 a bushel to make that happen. 

It's been a rough couple of years and grain farmers need higher prices to stabilize their operations. Stable means $60,000 in on-and-off farm income on a 1,500 acre corn and soybean farm in central Illinois says University of Illinois Agricultural Economist Gary Schnitkey.

"To have that happen," says Schnitkey, "prices have to be a $4.20 for corn, $10.20 for soybeans. If we have those prices, and lower yields, then we can expect to see financial working capital deteriorate and we are above those we can expect to see gains in net income and financial stability."

That is to say, if the price of corn is $4.20 and the crop is below average, the farm wouldn't be financially stable. By the way, the $60,000 net income isn't an arbitrary number.

"No, we look at our Illinois FBFM records," explains Schnitkey, "and at that level we farmers able to make investments that need to be made, withdrawing some level of for family living expenses, and for repaying debt. So, this is the breakeven level between financial stability and not financial stability."

The key to quantifying this work says Gary Schnitkey is to look at prices in August. This is because we'll be close enough to harvest to have a pretty good idea about actual cash prices for the crop, and looking forward to the 2017 season.

"So, if we are $4.00 and below corn prices, then we are going to have to look pretty hard, again, and cutting costs for the 2017 production," says Schnitkey.

It all means grain farmers throughout the nation may need to be wary of the price of corn in Chicago and take advantage of rallies as they happen.

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