March 19, 2015

19/03/2015: Pain from the grain: corn belt towns languish as prices drop

On a recent snowy afternoon on a farm in central Illinois, Dan Byers parked his pickup at the end of a dirt road and looked over some of his fertile land. A few years ago, high grain prices earned farmers here about US$400 per acre for their corn and soybean crops. This year, it's possible that every acre Byers farms will cost him US$50, The Salt reports

"It just takes a certain amount of fixed money to put a crop in and raise it," says Byers. 

"At today's prices, not much of anything works right now until there's a rebound."

Across the country, a number of farmers are likely to take a big pay cut this year. Nationwide, the US Department of Agriculture expects farmers will earn a third less than they did last year.

That blow to the bottom line is rippling through farm towns.

The prices of everything from corn to sugar have fallen, too. So some economists predict lower prices at the grocery store later this year.

Record corn production with no increase in demand – as well as a leveling off market for ethanol – have led to the lowest prices in six years: US$3.80 a bushel, down from an all time high of US$8.49 a bushel in August 2012.

Some farmers won't break even this planting season, which could force them to tap into their savings. That's bad news for Corn Belt towns whose prosperity depends largely on farmers and businesses linked to farming.

Frank Hofreiter owns the New Holland farm equipment dealership and employs 17 people in East Havana, Illinois.

When corn prices peaked, Hofreiter sold close to US$11 million worth of shiny blue tractors in a single year. He says he doesn't expect to crack US$3 million in 2015.

"Everybody's just trimming back and not doing much buying on new equipment," says Hofreiter. 

"Especially big, large equipment — anything over US$20,000."

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