I am thinking about the 2015 crop year and it was a rough year for some of the farms because of the amount of rain that we had during the summer. The summer of 2015 set records for the amount of rainfall received by the State of Indiana. As you drove stretches of State Roads 124 and 218 there were several fields that did not get planted. However, the farmers of the U.S. still produced big crops with an estimated 13.65 billion bushels of corn produced and 3.98 billion bushels of soybeans. Now this is not the biggest crop the U.S. has ever produced but the amount is within the top 5 biggest years.
Also big news in 2015 was the big Syngenta lawsuit. Syngenta sold and marketed the Viptera GMO genetics. To sum it up China rejected a shipment of number 2 yellow field corn, because it contained the Viptera GMO genetics that the country had not approved. This happened in November of 2013. Once the rejection occurred it was discovered that growers had not segregated the Viptera corn from other GMO field corn that they had grown on their farms. This particular corn variety was accepted by the USDA and it was discovered that Syngenta failed to tell growers and buyers such as Cargill and ADM that even though it was approved by the U.S. other importing countries such as China were still on the fence about it. The new variety of GMO had not been approved by the Chinese government. Needless to say, export sales went down for the remaining 2013 corn sales until the GMO was approved. This resulted in the devaluation for the corn price at the end of 2013 and into 2014.
As of today the corn and soybean prices are at $3.56 and $8.60 for soybeans which is very low compared to the expense of seed, fertilizer, herbicides, and cash rents. The expenses seem to be following the crop prices but at a much slower rate. Now keep in mind the lower prices today are due to an over-supply factor to the world. With today’s genetics in our crop and through the advancements of production technology in agricultural, there is no surprise to the surplus of commodities. Also grain prices seem to follow crude prices on technical level. As we all know crude prices have dropped substantially. Also, U.S. exports are slow because of our strength in the dollar. So it is difficult to get rid of this year’s crop.
So with this being said, every market has a high and every market has a low. It is my opinion the high in the land price is in and we are now going to see a down turn in the land market. But as I have always stated, farmland is an investment and this investment although prone to market turns will never be worth $0.00. Many investors I speak with compare this investment to gold. It is a tangible asset and is a great diversification in your investment portfolio. How long will the down turn last? It is anyone’s guess.
Today’s agriculture is a big business and today’s farmer is an educated business man not only in finance but also in agronomy and/or animal science. It is rare for a young man or woman to come back to the farm without a college degree or some sort of other advanced education. It is also a tough business to be in and that is why the farm population keeps shrinking every year.