Lower row crop commodities prices in 2016 hurt Arkansas farmers, and the trend is likely to continue in 2017, University of Arkansas at Monticello agriculture economist Dr. Robert Stark Jr. told Talk Business & Politics.
As of Friday (Feb. 10), soybeans, the state’s largest row crop, sold for $10.49 per bushel in cash markets, and could go lower, he said.
“It’s going to be a difficult year,” Stark said. “From the data we’ve been able to gather, worldwide supplies (of soybeans) are high, and soybean acreage numbers are expected to go up slightly.”
Soybean crops in South America, especially Brazil, haven’t been completely harvested. If weather or some other event affects the crop there, it might have a slightly positive impact for markets in the U.S., Stark said. It will be minimal at best, he said. South American yields have improved in recent years due to better farming practices, and governments there have invested heavily in infrastructure improvements to allow farmers to get their crops to river and ocean ports.
Corn crop acres are expected to go down about 2 million to 4 million acres nationwide, and that could also hurt soybean prices, Stark said. If those farmers aren’t growing corn, it will be some other crop, and soybeans are a likely candidate, he said. Rice acres in Arkansas are not expected to increase significantly which doesn’t bode well for soybean prices as well, he said.
Another issue is export markets. China imports almost 3 billion bushels of soybeans each year, according to USDA. The U.S. exports almost 2 billion bushels, and remains the leading soybean grower and exporter in the world, according to USDA. China consumes the lion’s share of the U.S. soybean export market, but the recent dismissal of the Trans Pacific Partnership (TPP) agreement by President Donald Trump, and a potential trade war with Mexico and changes to the North American Free Trade Agreement (NAFTA) could cut markets at a time when market growth would significantly help Arkansas farmers, Stark said. Mexico alone buys more than $1.4 billion in U.S. soybeans last year.
Arkansas farmers dedicated about 3.2 million acres to soybeans in 2016, according to the United States Department of Agriculture. Soybean prices fluctuated wildly last year. The crop, used primarily in livestock feed, steadily gained value in the commodities market through late June 2016, when the price reached a yearly high of $11.24 per bushel. The price changed erratically through the rest of year, and by late December it was $9.97 per bushel.
The November soybeans futures market predicted soybeans will trade anywhere from $9.80 to $10.30 per bushel in 2017. There has been a slight price rally during the first six weeks of the year, but it has largely tapered off, Stark said. Farmers have to be strategic and monitor market prices closely to ensure they will get the best prices for their beans, he said.
When prices are this low, farmers struggle, Stark said. A recent analysis indicated a farmer will net $185 per acre, after all input costs are tabulated, if the acre yields 60 bushels, at $10 per bushel, he said. Many farmers rent acres, and that cost is not part of the tabulation, he said. It’s not uncommon for a farmer to rent an acre for $180, meaning renters make very little return on their investment with prices this low, he said.
If the price dropped to $9.50 a bushel, it would drop the net to $128 per acre. The 60 bushel per acre yield is a conservative number, and many farmers will outperform that figure, he said.
Arkansas soybean farmers enjoyed an all-time high in the market almost five years ago when prices hit $17.65 per bushel during the Labor Day weekend in 2012. The renewable fuel market experienced a sharp increase at that time, pushing corn prices higher. When corn rose, so did soybeans, he said. Since then, prices have dropped more than 40%. Stark recently attended a row crop conference and none of the major crops – wheat, corn, rice, peanuts, etc. – will rebound price wise this year.
Low prices aren’t the only problem farmers may have to deal with. Last year heavy rains in August caused massive damage to row crop fields in the state. It’s been estimated farmers lost almost $50 million worth of crops. Weather, disease, price, world market shares, more acres, and other factors make farming difficult, he said.
“A lot of farmers are really under the gun … when they apply for operating loans they really have to make sure their calculations are precise,” he said.