Kalispell farmer Chris Fritz considers himself pretty lucky.
In April, he sold about half of his fall harvest in advance, taking advantage of prices that were almost double the 10-year average and offsetting some of his soaring input costs. In short, Fritz caught the market before the bust.
“If I wouldn’t have contracted anything I would not be making enough money to live this year,” he said. “That’s the reality of the situation.”
For much of 2008, farmers have been hoping they would sell this fall’s harvest at record high corn, soybean and wheat prices. But in recent months, grain prices have fallen hard as better-than-expected crop yields, a flight of investment money out of commodities and the prospect of a global recession have cut demand.
The result, farmers and agriculture officials say, was a season that certainly wasn’t disastrous – but it also wasn’t the boon many had expected. The few farmers who were lucky enough to play the market perfectly benefited hugely, while most saw modest increases, just balanced their ledgers or, in worst-case scenarios, saw losses.
In July, a bushel of corn was trading for almost $8. Last week, it was going for $3.70. Soybeans have fallen from nearly $16 per bushel to less than $9 per bushel over the same period. Wheat prices, which jumped as high as $18 per bushel earlier in the year, have since leveled out at about $5 per bushel – still well above the traditional average of about $3 to $4 per bushel.
All told, the three agricultural commodities have dropped almost 50 percent in four months.
“It’s causing a great deal of stress out there in the countryside amongst producers,” Ron de Yong, director of Montana’s Department of Agriculture, said. “The commodity prices are falling much faster than the input prices.”
In theory, farmers should have been on track for one of their best years ever this spring with record crop prices. In reality, they were still running a precarious line between debt and success, as the costs of fuel and certain fertilizers also hit record highs, doubling or tripling in some cases. “Costs were outrageous,” Fritz said.
The high input costs meant the break-even point for farmers was significantly higher than in past years. Many farmers, hoping to benefit from the bullish market conditions, took out larger-than-usual loans to cover expenses, expecting the harvest to make up the difference.
“The concern is selling things at the right time so that you make enough to offset input prices and carry forward some money,” Nancy Schleep, director of national affairs with the Montana Farm Bureau Federation, said.
The price a farmer gets for his crop depends on the market price when he sells his harvest. The sale can take place in advance of the actual harvest. Only farmers who sold when prices were at their height earned the record income for their crop – and few, if any, sold all their produce that early in the season.
“You have to be leery of booking too much too early,” Fritz said. “You don’t want to sell something you don’t have.”
While he had success with the first half of his crop, Fritz wishes he would’ve sold another 25 percent as planned earlier this fall. “I thought the price was getting too low, so I held off,” he said. “That was a dumb idea – it got lower.”
After experiencing yo-yoing prices throughout 2008, Montana farmers are trying to develop a strategy for the coming year – a difficult task in an already unpredictable industry.
“To make the same kind of decisions I used to make five years ago when I was still farming is much harder,” de Young said. “You’re putting twice as much money on the line for basically the same kind of reward.”
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