Crop-price Optimism Fades to Reality
Chris Hurt, Purdue Extension agricultural economist
Last April, Indiana faced the brightest income prospects since the 1970s. Prices for the 1996 crop were buoyant. Corn prices were expected to be near $3.50 per bushel, soybeans would average near $8, and wheat would exceed $5.
Indiana farmers intended to plant nearly 6 million acres of corn and nearly 5 million acres of soybeans. With normal yields, Indiana's gross revenue for corn, soybeans and wheat would reach a record $4.5 billion. In addition, government transition payments would push the gross to nearly $4.7 billion.
The springtime optimism, however, was short-lived. A wet spring led to record late planting and concerns grew about whether Indiana would have a crop at all. The state's corn acreage was reduced to about 5.6 million acres and soybean acreage took up the slack as farmers shifted to the later season crop.
Now, farmers face the reality of below-average yields and prices that have fallen below those of last year. Current prospects are for Indiana corn to average about $2.80 per bushel, while soybeans are expected to average about $6.80 per bushel.
Given the yields estimated by the USDA, gross revenue for the 1996 crops, including transition payments, will be near $3.5 billion -- about $1.2 billion below those of early spring. With nearly 12-million planted acres, this means that revenue prospects dropped $100 per acre from the spring optimism to the fall reality.
In 1994 and 1995, revenues from crop sales and government payments were about $3.5 billion dollars for Indiana producers. Therefore, 1996 will go down as another year when revenues were similar to the previous two years. What was lost in 1996 was the opportunity for farmers to convert optimism into reality.