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High crop prices, perfect weather a boon to farmers

Posted November 05, 2007 10:00 pm

Tim Landis

Favorable harvest weather. Corn flirting with $4 a bushel. Soybeans at $10. It brings to mind the old beer commercial line: It doesn't get any better than this.

Or does it?

With the fall harvest in and farm profits projected to set a record this year, attention among farmers and economists has turned to just how long the boom can last and to the possible ripple effect of high farm prices on consumers.

"This is unique. This is really the second consecutive year of these kinds of conditions, and it looks like it's more or less permanent," said Darrel Good, professor of agricultural economics at the University of Illinois.

Well, as permanent as the cyclical nature of farm prices ever is, Good added.

Rural Rochester farmer Jimmy Ayers finds himself in the midst of a typical year for Illinois farmers - corn yields at 145 to 235 bushels an acre, soybeans at 43 to 53 bushels an acre, and crops that are in early, thanks to a dry fall.

"I was done September 30. I've been doing this 22 years, and this is the first year I have ever finished by the end of September," said Ayers, who farms 800 acres of corn and soybeans with his wife, Cydney.

"It's an unbelievably high market. … This won't last forever, but at what point it'll go down, I don't have a clue," said Ayers.

Also true to statewide trends, about 70 percent of Ayers' acreage was planted in corn this year. Corn acreage nationwide is up significantly in response to the demand for corn-based ethanol.

"This year has been a very good year for corn, and on the bean side, it's been average," said Matt Montgomery, a crop education specialist with Sangamon-Menard County Extension. Montgomery said he expects local corn yields to be at about the 188-bushel-an-acre average estimated in late summer.

"It's also been a very early harvest. It's one of the earliest harvests any of us have ever seen," he said.

According to a U.S. Department of Agriculture report released Monday, Illinois corn and soybean harvests were 98 percent complete, compared to a five-year average of 92 percent and 95 percent, respectively.

Grain prices also have been driven up by export demand, especially from Asia. And while a glut of ethanol pulled down the price of the alternative fuel this fall, experts foresee little letup in demand for corn.

"There are just so many factors that go into the price of corn. We're in such a global market that, even if it's not ethanol, it's international trade," said Jim Birge, manager of the Sangamon County Farm Bureau.

Corn on the Chicago Board of Trade was priced about $3.75 a bushel Monday and traded at more than $4 for May 2008 contracts. Soybeans traded at $10.05 per bushel, a price that was projected to continue increasing into 2008.

Record farm profits - the federal government estimate of $87.1 billion for 2007 compares to $28.1 billion in 2006 and a 10-year average of $57.4 billion - don't necessary translate into aisle-to-aisle increases in prices at the grocery store, said Paul LaPorte, bureau chief for the U.S. Bureau of Labor Statistics in Chicago.

"It just really fluctuates," said LaPorte. In fact, energy, transportation and apparel prices accounted for most of the increase in the latest Midwest consumer price index released in September.

But record corn and soybean prices do bring other concerns, including higher feed costs, the cost of transportation, storage and rising farmland prices.

Good also pointed out the cost of renting farmland has begun to increase.

"The big question is how big a piece could they (landowners) get or should they get," said Good.

Tim Landis can be reached at (217) 788-1536 or tim.landis@sj-r.com.

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