By VICKI JOHNSON
Ohio Correspondent UPPER SANDUSKY, Ohio — The agricultural economy right now is frustrating, at best, in the words of Ohio State University ag economist Matt Roberts.
“We can do everything right this year and still lose $100 to $150 per acre,” Roberts told attendees at a recent OSU Ag Outlook meeting. “I’ll be honest. I don’t have a flippin’ clue about what’s going on. Any excuse this market has to fall, it has used to fall. It is a market that has a tremendous amount of bear sentiment around it.”
He didn’t know when to predict the fall will end. “It’s really hard to decide when it’s going to stop,” he said. “It’s like trying to catch a falling knife.”
Roberts said $3.50 corn is the new $1.75 corn.
“Corn is being driven right now almost whole-heartedly by the oil industry,” he said.
Ethanol has created string linkage. Those plants can operate profitably when corn is about $3.50 or less per bushel. “At about $4, ethanol plant would lose less money by not operating at all,” he said. “There’s a tremendous amount of volatility in the expected amount of corn ethanol plants will need.”
He said E85 sales must increase to keep the United States meeting its renewable fuels goals.
“As the mandate ratchets up, more and more is going to have to be sold as E85, and that’s going to squeeze the margins even more,” he said.
While there is no price incentive currently for farmers to plant corn, Roberts said farmers need to plant an additional 3-4 million acres to meet demand, even though demand has lessened because the world’s wheat production has increased 10 percent.
“Most wheat in the world goes into feed,” he said.
Regarding fuel prices, Roberts said half the cost of the recent high fuel prices was a weak U.S. dollar. “The opposite is true now,” he said. “For the past six months, the U.S. dollar is seen as the safest asset in times of world crisis. Part of the fall in the price of oil is also being driven by an increase in the value of the dollar.” Also during the outlook program, ag economist Barry Ward reviewed several budget scenarios to help farmers lessen the impact high input costs might have on farm profits in 2009. He said input costs and grain prices don’t leave much room for labor and machinery costs or land rent. He suggested reducing fertilizer where possible and storing fuel when prices are at lower levels. Ward also suggested discussing flexible cash rent leases with landowners, which provide profit-sharing during good years and lower payments during less profitable years. December 31, 2008 |
