Ag economist optimistic about the future
Ag economist and farmer Brent Gloy of Grant thinks the downturn in the ag economy may soon be behind us.
Gloy spoke to people attending the open house for ASD Enterprises, a Channel seed dealer, in Imperial Tuesday, Aug. 15.
Gloy sees some positive things happening and feels the roller coaster ride farmers have been on the last 10 years is closer to stabilizing.
He noted farmers have never experienced the likes of high commodity prices they saw from 2006 to 2013. “There’s been no period like it in the last 100 years,” Gloy said, because he’s gone back and researched it.
But the boom time also increased land prices and cash rents on land, as well as the price for other inputs such as seed and fertilizer that followed along.
As commodity prices have dropped, so have these other costs, he said, bringing down the breakeven point for crop production.
With exceptional corn and soybean yields this year, along with a bump in commodity prices, farmers could actually make a little money this year, he predicted.
Bio fuels responsible for run
Gloy said the renewable fuels standards, which sought to increase bio fuel consumption, introduced by President George W. Bush prompted the big run-up in commodity prices.
And with that demand, more corn acres were planted, leading to surpluses and lower prices.
Another occurrence played a big factor in prices going down—an increase in world acreage.
He said total world acreage increased from 1.6 billion to 2.3 billion acres.
South America represented the biggest growth in acres over a 10-year period from 2004-2014, adding 86 million acres on top of what they already had.
Gloy said that 86 million acres represents of the soybean acres in the U.S. for a year. So. it’s easy to understand how those new acres in production has added to the supply and dropped prices.
With the profitability of wheat declining in 2016, the U.S. planted the fewest wheat acres ever at 45.7 million, a drop of about 5 million acres.
Those acres went into corn and soybeans, putting more supply pressure on prices. He added that the U.S. planted the most soybean and corn acres ever in 2016.