The warm weather early this week found Lexington, Nebraska, farmer Don Batie already halfway through planting corn — a bit ahead of schedule and optimistic about his crop.
The optimism didn’t extend to his bottom line, though. Batie expects to lose money farming this year — and so will most U.S. farmers.
Farmers across the Corn Belt have kicked off another growing season, investing billions of dollars in seed and fertilizer despite U.S. Department of Agriculture forecasts that net U.S. farm income will decline this year by nearly 9 percent, to $62.3 billion. That would be the lowest since 2002, adjusted for inflation, and would be the fourth year of declines after income figures hit a record high in 2013.
Meanwhile, the median income for farmers will be negative, the USDA projects, at a loss of about $1,400. That doesn’t mean farm families have no income; median household income for farmers is projected at nearly $80,000 in 2017, but the money comes from off-farm work.
So why was Batie, 58, pulling a planter through his field, knowing he’ll be dipping into his savings account to buy groceries this year?
“Like any other small business, you can’t afford to quit,” he said. “You can’t take one year off.”
There are bills that come due no matter what: property taxes, loans for machinery. And when you rent all or some of your land, you plant or your landlord will find someone else to rent to.
“If I’m not going to farm this year, they will find someone else who will, and I will never get that land back,” Batie said.
Early-season optimism for a profit is waning with planting now underway, Iowa State University economist Chad Hart told The World-Herald. He said demand for agricultural products — grain, the livestock that eats the grain and the fuel made from it — is high in the United States and abroad, but huge supplies are keeping prices low.
To break even this year, Hart said farmers would need between $3.60 and $3.70 a bushel on corn, and $9.60 to $9.70 on soybeans. The Nebraska Corn Growers Association put the break-even price on corn even higher, at up to $4.25 a bushel for some growers.
“Cash prices today, we’re below those levels,” Hart said.
Facing those numbers, farmers are spending less. The volume of farm loans nationally fell 16 percent in the first quarter of 2017, to $82.5 billion, compared with the first quarter a year ago, the Kansas City Fed said in a recent quarterly report.
Ag bankers have been refinancing old loans, raising interest rates and extending loan maturity periods because of farmers’ reduced capacity to pay back what they owe.
Batie, the fourth generation of his family on the land, said he’s fortunate to have equity in his farm business to get him through another lean year.
“Long term, I’m still very bullish on agriculture,” he said. “There’s a growing population of the world that needs fed. But in the short term, it’s going to be tough economically.”
Years like this show why farms need working capital, a rainy-day fund, said Cory Walters, ag economist at the University of Nebraska-Lincoln. It can be tough to cut annual expenses much.
“You can’t cut fertilizer if your soil sample says you need fertilizer,” Walters said, “but if you’re thinking of buying a newer tractor? You might ask the question of ‘Can I survive with one that’s a few years older?’ ”
He advised farmers to have a clear picture of their costs and be ready to sell when the market hits what would be a profitable price. Juniata, Nebraska, farmer Chad Trausch, 40, who finished planting corn on April 22, said that’s the tack he takes.
“You have to set a target price for where you think you can make money and hopefully have the opportunity to hit those targets,” he said. “I constantly watch the markets every day.”
He said he’s no expert at it — “I’d be on the Chicago Board of Trade, not out here working” — but he’s feeling comfortable this year having pre-sold much of his corn and beans.
The same philosophy holds for Lance Atwater, 27, who grows white corn — used in tortillas — and popcorn in addition to yellow commodity corn, farming with his father near Ayr, Nebraska. Atwater said he keeps a careful eye on expenses and his break-even price.
“At the end of the day it’s about being profitable,” he said. “It’s not about getting rich.
“It’s not exciting planting $3 corn, but no matter what, the farmer is always going to put the crop into the ground and he’s going to put his best effort into growing that product.”
This time in 2013, cash prices for corn topped $7 a bushel; in 2016 they averaged less than half that, at $3.40, according to Iowa State University.
In another strategic move, Nebraska farmers this year said they planned to plant fewer overall corn acres and a record amount of soybeans, which are seen as being cheaper to grow and with a better chance of a profit this year. Weather could push farmers to plant even more soybeans, typically planted later.
Prague, Nebraska, farmer Dennis Fujan, 69, planted soybeans ahead of corn this year, going against the grain and looking for better soybean yields through more days of maximum sunlight. Still, he’s not optimistic about a profitable year. He’ll spray for weeds himself this year instead of hiring out the job.
Warm weather in early April gave some farmers a head start on corn, especially toward the western part of the state. Nebraska farmers had planted 17 percent of their corn as of the week ending last Sunday, compared with a five-year average of 11 percent. But it was too wet in parts of eastern Nebraska for much planting, and in Iowa, only 8 percent of corn had been planted, behind a 14 percent five-year average.
The cooler weather this week, with heavy rain predicted in Missouri and Illinois and snow in some parts of northeast Nebraska, had many in a holding pattern.
Weird weather could be good for farmers — as long as it happens on someone else’s farm. Many hope for a “weather rally” in prices, the result of drought or floods elsewhere, said Hart at Iowa State.
In the face of low prices, Kelly Brunkhorst, executive director of the Nebraska Corn Growers Association and the Nebraska Corn Board, said the industry is working to expand markets for corn. An upcoming visit to Nebraska from a Mexican trade team underscores the importance of that market, even as President Donald Trump waffles about withdrawing from or renegotiating the North American Free Trade Agreement.
Meanwhile, farmers are itching to finish planting.
“As crazy as it sounds, we are talking about trying to plant today,” Wisner, Nebraska, farmer Jack Godbersen said Thursday, with highs in the 50s.
Godbersen, 28, is the eldest of four boys, all of whom are part of the family farm business. The two younger sons are in school, and the two older sons help support themselves with side jobs, but the main farm operation is where their passion is, Godbersen said.
They cut some costs this year by planting less-expensive varieties of corn, and are at best hoping to break even. But despite what Godbersen called a doom and gloom outlook, he said he’s happy to be farming.
“As long as you can stay afloat and break even, those years that turn out good, they pay well, and we just love what we’re doing,” he said.