It would appear that prospects for 2015 farm profits are drowning, an apt metaphor considering how wet this year has been. We had record June rainfall for Indiana and Illinois and as I write this July 9, the weather man has forecast rain for the next five days here in Central Illinois. And, I'm tired of ark jokes.
Well, we knew the bottom line for grain farmers would be ugly this fall. Now it's time to take a hard look at 2016, where the prospects don't really look much better – at least, not yet.
University of Illinois economist Gary Schnitkey came out with one of the first 2016 crop budgets here and said with projected prices of $4.20 for corn and $10 for soybeans, cash rent prices would need to drop 25% to 30% to make profits at the 2000 to 2005 levels.
Does anyone believe land rents will drop that much? We had a little hand wringing last winter over land rent negotiations, but it won't be anything like what we'll see this next winter. Farmers had some money in their pockets and they were willing to burn some capital in order to stay in good graces with most landlords; will they be willing to do that again for 2016?
On the variable cost side, fertilizer and seed are the big ticket items in the crop budget. We'll start getting indications for fertilizer and seed prices by September. Fertilizer prices may be under pressure next year, and that will bring some relief to your cost equation.
New era of conventional seed
There's a good bet non-GM seed may get a closer look. "Non-GM seed has a lot more interest on the domestic level," says Chuck Hill, specialty products manager at Agrigold. "This may be the 'new era' of conventional seed."
There are two customers for non-GM seed. First is the grower who is working on a contract to grow Identity Preserved, non-GM or food grade grain. Those farmers go through rigorous protocols, checkpoints and equipment clean-outs, but they may be able to make a $2 premium on top of $9 beans, so it could make a big difference to their bottom line.
Hill says roughly half of the farmers buying non-GM seed are working for a premium, but that varies by seed company.
On the other hand we'll probably see more farmers decide if seed treatments and biotech traits are really necessary on some fields. These guys will be looking for 'barebones' seed with good genetics.
You'll need to put on your agronomy hat and have a good understanding of field history before making these decisions. A lot of folks have forgotten how to manage crops using conventional weed and insect control. I'd suggest getting a seed or agronomy consultant for advice before doing anything radical.
If you are buying non-GM seed, make sure you have documented evidence that the seed company you are buying from has tested the seed; it should contain 1% or less GM seed.
Be forewarned: the extra testing to ensure non-GM purity does add to the cost of the seed.