Spread the Cautious Optimism

Prairie Gleanings

"Cautiously optimistic" was a common phrase this winter meeting season. Beware though, $5 corn (or less) could be around the corner.

Published on: March 29, 2013

April is upon us. It's almost time to leave the artificially-lit conference halls for the sweet smell of freshly-tilled black soil.

Before folks get out there, let's reflect on the winter conference season. Perhaps the most notable theme is caution. In March alone, I heard multiple economists warn that ag could be headed for a downturn in 2013.

During the Illinois Society of Professional Farm Managers and Rural Appraisers famland value conference, DuPont economist Steve Elmore has heard many farmers say, "I could make it ok with $5 corn." Problem is corn could be heeded south of the $5 mark, Elmore warns

Looking at his price projections based on a variety of yield assumptions, there are more data points below the $5 mark than above. He also points out that the USDA projections pinpoint $4.80 as the likely average corn price for 2013. So, can you stay solvent with corn under $5?

How can you not feel hopeful when spring emergence is in full swing?
How can you not feel hopeful when spring emergence is in full swing?

Purdue economist Mike Boehlje is also concerned about ag's economic future. Near term, he notes land values cannot continue to jump 15%+ each year. We could be headed for a tipping point. If we continue to max out bid potential for land, a bust may be looming.

He warns paying too much for land is a sure way to go bankrupt fast. Boehlje remembers his father bringing a little black book to the sale barn. On those pages, he’d penciled in the absolute maximum he was willing to bid for feeder cattle. Once his limit was reached, he ceased bidding.

It’s critical to set limits in 2013, Boehlje warns. Know your limits and work within them.