High Yields and Aid Help Offset Low Commodity Prices

Writer(s): 
High yields on corn and soybeans, plus expected government payments, will help farmers contend with the slump in commodity prices. (Photo: Getty Images)

COLUMBUS, Ohio — Record-high crop yields and new government aid are expected to help insulate Ohio crop farmers from significant financial losses that would have occurred because of low commodity prices, according to a recent Ohio State University study.

If net income for farms across Ohio this year follows the projected national trend, then it will decrease by 15 percent compared to last year’s total.

But it could have been a whole lot worse.

Fortunately, Ohio farmers, on average, are basking in high yields. The average yields of both soybeans and corn are projected to beat the state’s previous record highs. Soybeans, which are estimated to average 60 bushels per acre, are expected to top last year’s average by 19 percent, and the 190 bushel-per-acre average for Ohio corn is up 11 percent from 2017’s average, according to the U.S. Department of Agriculture (USDA).

“It’s not just a good year in terms of yields statewide, it’s an incredible year. And that’s helping our financial standing,” said Ben Brown, manager of the farm management program in the College of Food, Agricultural, and Environmental Sciences (CFAES) at The Ohio State University.

Brown is one of three authors of a recent CFAES study about a new government compensation program called the Market Facilitation Program (MFP), which is aimed at helping offset farmers’ losses as a result of the recent overseas tariffs on U.S. goods. The study’s two other authors are Ian Sheldon, an agricultural economics professor in CFAES who serves as the Andersons Chair in Agricultural Marketing, Trade and Policy; and Haylee Zwick, a graduating senior in CFAES’s Department of Agricultural, Environmental, and Development Economics, where Brown and Sheldon work.

Through the new government aid program, the per-acre compensation to Ohio growers on average will be $47.85 for soybeans, 94 cents for corn, $5.25 for wheat, $4 per pig and 6 cents per 100 pounds of milk, the study found. The estimates are based on average yields and will vary, so farms with below-average yields will be compensated at lower rates.

An Ohio farmer with 1,100 acres who harvests 660 acres of soybeans and 440 acres of corn is estimated to receive a government compensation payment of $31,988 before taxes, according to the study. That payment will supplement whatever the farmer earns from crop sales.

The compensation is being offered in part because the per-bushel prices for corn and soybeans, the most commonly grown crops in Ohio, have plummeted. That’s due to foreign tariffs imposed this year on soybeans, corn and other U.S. goods sold abroad, as well as greater than average supplies of both crops, Brown said.

Payments to producers are based on 2018 production levels for corn and soybeans and include a cap of $125,000 to any individual farmer or business. In Ohio, an estimated $255 million in government compensation is expected, according to the study.

“These payments will help financial positions,” Brown said. Even so, “some farmers will say, ‘We’re below what we could have had with record yields and average prices.’ ”

The drop in commodity prices has coincided with a flurry of tariffs imposed first in the United States, then abroad. What began with a 25 percent tariff on foreign steel and 10 percent on foreign aluminum purchases in the United States has burgeoned into U.S. tariffs on $250 billion in Chinese goods. China countered with retaliatory tariffs on U.S. products including soybeans, which now have a 28 percent tariff in the Chinese market.

“Next year, we expect farmers to reduce acreage or switch to more profitable crops” depending on what they project they will make on next year’s crop, Brown said.

Between May, before the first round of tariffs were imposed, and September, the price the USDA reported for soybeans dropped by $1.40 a bushel, from $10 to $8.60 per bushel and corn decreased by 30 cents a bushel. 

The government’s compensation to farmers “is not the ideal solution, but it will help producers stay afloat and get to the next production year,” Zwick said.

Farmers who want to apply for government compensation through the MFP program can do so until Jan. 15, 2019, through a local office of the Farm Service Agency, which is run by USDA.

The study on the MFP program can be found at go.osu.edu/MFPreport.

For more information contact: 
Alayna DeMartini
614-292-9833
Source(s): 

Ben Brown
brown.6888@osu.edu
614-688-8686