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Commodity crops bringing in sluggish profits

Provided by Mossy Oak Properties


Falling commodity prices have affected producers' bottom lines, especially those who do not own the farmland they work on. A bushel of soybeans sold in today's market goes for nearly half as much as it did just three years. The Wall Street Journal reported soybeans peaked at roughly $17 a bushel in 2012, and have since fallen to $8.69, the closing price on Nov. 12.

But it's not just soybeans that are forcing farmers to cut expenses and rethink their budgets, as corn prices have dipped even more so, from $8 in 2012 to $3.62 as of Nov. 12.

In total, these price declines of the nation's staple crops have painted a somewhat bleak picture for farmers who are focused on pushing more products but seeing less returns. With each bushel produced, farmers today can expect to receive fewer profits, a hard reality that isn't poised to change anytime soon.

Wheat production down as well
The U.S.'s principal grain product, wheat, has been the backbone of the agriculture industry for decades, however, other players in the market have rushed to fill the gap in the U.S. wheat export volume. The U.S. is the third largest producer of wheat in the world, yet has traditionally exported more grain than any other country. The U.S. Department of Agriculture's new Wheat Outlook report for November showed wheat exports are at their lowest level in more than 40 years, though.

Though total international wheat trade has risen, the U.S.'s share of the market has fallen, with the USDA projecting 800 million bushels of wheat exports this month, and 50 million fewer bushels overall for the year.

Share of the wheat market may be down slightly, but the report noted that this is mostly due to the fact that the value of the U.S. dollar has gained strength in recent years, meaning it has been a bit cheaper for companies to purchase from other countries using different currencies.

"The strong U.S. dollar vis-a-vis all major currencies and ample wheat supplies in all major wheat-exporting competitor countries reduce even further the declining market share of U.S. wheat exports that is currently projected at 13.7 percent - the lowest level in the history of the USDA database," the report stated. "The U.S. has been steadily losing market share in wheat trade, and recovery in future years is expected to be very modest (if any), given the country's increasing comparative advantage in and shift to corn and soybeans."

Farm income
While wheat production is ceding ground to corn and soybeans, farmers are still faced with the fact that they are netting fewer dollars for their work at the end of the day. Compared to last year, net cash income is down 21 percent, which means farmers renting the land they work on have to locate profits elsewhere just to maintain their ability to meet monthly lease payments, The Journal reported.

The good news is that farmers are some of the most industrious and thrifty workers in the entire economy, and those who've been in the industry for a long time are well-equipped to handle these types of market conditions.

By focusing on those farm products that are safer bets to bring in stable, albeit lower, returns, farmers can best weather low-profit economic times. Likewise, by partnering with community organizations such as schools, hospitals and local markets, farmers can secure steady contracts.

At Mossy Oak Properties, land brokers understand every type of land, including farmland, and are capable at connecting farmers with productive property. Contact a representative at Mossy Oak Properties today for more information on farming and the land sales industry.

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