2/8/2014 7:00 AM
By Jessica Rose Spangler Reporter
MIFFLINBURG, Pa. — “No one can predict the future,” John Berry said as he addressed more than 50 people at the Central Pennsylvania and Central Susquehanna Valley Crops Conference on Jan. 31. “What I’m about to say has no merit because I can’t predict the future.”
Berry, ag marketing educator at Penn State, painted a relatively optimistic picture for livestock and dairy producers, even though he doesn’t believe crop farmers will see record prices again in 2014.
“A good marketer never talks in dollars and cents,” he said. “Corn price is under pressure in 2014. Who knows where it’s going, but I see no reason for it to go up unless we have weather trouble.”
When producers were faced with the impending $8 per bushel corn prices, “they converted every pasture and cow path” into corn production, Berry said, making 2013 the largest corn harvest on record.
For the week of Jan. 27, Pennsylvania corn prices averaged $4.24 per bushel and soybeans $12.65 a bushel.
As of Jan. 31, the 2014 Chicago Mercantile Exchange projection for fall corn was $4.48 per bushel.
“I need $5 (per bushel) to survive. I’ll probably have to take less out of my family income,” Berry said as if he were the corn producer.
He projects that soybean prices will hover around $11 per bushel in the fall after 2013 was the third largest crop in history.
“That’s still at a level I can break even and make a little extra with my break-even of $10.50,” Berry said.
Berry cautioned that soybean prices could see some changes in the next few months as South America’s harvest continues.
“I feel it’s my job to beat farmers over the head about understanding what their break-even is,” he said. “Wanting 10 cents more than your neighbor or wanting the most you can get isn’t realistic.”
Every producer’s break-even is different because everyone has different costs and even farmers living five miles apart can be coping with different weather patterns. On top of that, no one has control of an increasingly volatile market.
These reasons are why Berry advocates understanding crop insurance.
“Know what’s available to you and then decide if you need it,” he said. “There’s protection for almost all crops and some livestock. What can’t get covered with federal payments may still be able to go through FSA.
“On average, every dollar invested in crop insurance in 2012 got $1.25 back. The five-year average shows getting over $2 back,” Berry said.
Pennsylvania farmers are able to get between 50 and 85 percent coverage.
In 2013, if a farmer produced 140 bushels of corn per acre and had 75 percent coverage, he would expect to see $593 per acre with a corn price of $5.65 per bushel.
In 2014, the projected price is $4.60. With the same coverage and yield, the farmer would only have $483 of guaranteed revenue.
This example illustrates Berry’s point of producers understanding their break-evens and then trying to obtain crop insurance coverage that at least covers their input costs.
“The real benefit of crop insurance is protection. The only alternative is crossing your fingers and hoping,” he said.
For the crop producers in the room, Berry offered some suggestions on how they could lower their input costs and therefore lower their break-evens — use cheaper seed, apply less fertilizer for the same yield, or convert some corn acres to soybeans or hay.
“Pay close attention to June’s weather forecast,” Berry advised. “Don’t pre-harvest your corn. Put it in a bin and wait to see what winter prices look like.”