Monday, August 12, 2019

Down on the farm - more lower prices, and less spending on other things

Two more bad bits of bad news for farmers in both our state and the rest of the Midwest today. The first comes from a new national report illustrating how farm closings affect other areas of the economy in Wisconsin, as fewer farms mean less spent on farm production items.
The latest report from the National Agricultural Statistics Service (NASS) found the average Wisconsin farm spent $155,093 on last year's production expenditures. That's 12 percent less than the 2017 average, which NASS adjusted after the latest Census of Agriculture was released in April.

Spending on trucks, machinery and farm improvements saw some of the largest declines from the previous year, with each expense category falling between 67 and 45 percent. These categories saw the largest spending increases in 2017 after falling in 2015 and 2016.

Kevin Bernhardt, agribusiness professor at the University of Wisconsin-Platteville, said the decline in 2018 highlights the way that farmers are trying to cut back on spending when possible after dealing with years of low commodity prices.

"That is something that's more in control of the producer to decide not to do that improvement this year, decide not to do that piece of construction this year, decide not to buy that new tractor this year," Bernhardt said.

Feed expenses, which represent the single largest production expense in the state, also fell in 2018. Farmers spent about 7 percent less on feed than in 2017.

And farmers got even more bad news today when the US Department of Agriculture said the recent stretch of good weather is making up for time lost this Spring.
Corn and soybean futures both fell sharply Monday after the U.S. Department of Agriculture's August production estimates projected larger-than-expected crops following an extremely wet spring that severely delayed corn planting, followed by dry conditions across much of the Midwest. Corn for December delivery dropped 11.5 cents, or 1.3%, to $8.8075 a bushel. The report estimated that U.S. farmers would produce 13.9 billion bushels of corn, down 4% from last year but larger than analysts had expected. Soybean production is forecast to fall 19% from last year to 3.68 billion bushels.
So almost all of the runup in prices that have happened for these crops since the rains came in Spring is going to be wiped out by harvest time. That might be good news on keeping inflation down (I had worries about this a month ago), but not good if you’re a farmer that’s barely getting by before these prices dropped today.

And those two bits of data makes it likely that this awful trend will continue for the 2019 growing season.

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