Farmers are going to have step up their game as they suddenly face lower prices after a long bull market, says an Iowa crop analysis expert.
“When you have huge crop prices, good crop prices, you can make some mistakes and get away with it,” Patrick Reeg, who manages the Iowa Soybean Association’s On Farm Network, said in an interview during the Manitoba Agronomists Conference.
“I think growers are really going to be paying attention to the decisions they make (in 2014-15). They’re going to think things through, they’re going to be picking and choosing which products they use.”
Reeg told the conference that farmers have grown accustomed to historically high prices.
In Iowa, from 2001 to 2005 they received around $5.78 per bushel for soybeans and $1.90 to $2.40 per bu. for corn.
However, prices rose after 2006, with soybean prices often exceeding $10 per bu. and corn often higher than $6 per bu.
That has ended and a new trend toward lower prices has rattled farmers but also prompted them to be more ruthless when maximizing production and reducing costs, he said.
“Most of them are already good operators, but they’re looking for every piece of efficiency to add to the operation,” Reeg said in the interview.
In his presentation, Reeg highlighted how rising crop prices increased land costs in Iowa.
“It’s nothing to see cash rents exceed $400 per acre,” he said.
Land purchases have become expensive, especially where farmers fighting for scarce land have driven prices to $20,000 per acre in extreme cases.
“When you get neighbours in bidding wars, that’s what you get,” said Reeg.
He said lower crop prices will challenge some of those prices and reduce the enthusiasm that some farmers had for gobbling up all the land they can.
Reeg said lower crop prices and higher production costs mean farmers can’t afford to get any of their major decisions wrong.