Category Archives: Iowa

Remarkable Graphs of Corn & Soybean Profitability

CORN

Blue blocks: Profitable time periods. Note that I’ve altered the graph by adding red and blue blocks to show profitable years vs. profit-loss years. Source: Ag Cycles: A Crop Marketing Perspective By Chad Hart/Iowa State.

The remarkable graph above, showing corn profitability since 1972, says it all.

The article in which the graph is embedded, by Iowa Ag economist Chad Hart, begins like this… “Over the past seven years, corn and soybean producers in the United States have enjoyed their best run of returns in history.”

Hmmmm. Let me think. What happened about seven years ago?

After that he explains that profitability is cyclical in a competitive industry such as commodity farming, and that “economic theory indicates the long-run profitability of a competitive industry is zero.”

Hart says, “When we examine the average return to a bushel of Iowa corn over the entire time period from 1972 to 2012, it is a positive 5 cents per bushel. However, if you looked at 1972 to 2011, the average return was negative.” !!!

He then warns of a near-term downward cycle of lower commodity and farmland prices.

It’s already happened. Corn prices have fallen. This year’s producers who are renting land that is priced according to yesterday’s profits, may see a tough bottom line.

Unfortunately, from there on out in this paper, Hart goes off on economist tangents about interest rates and input costs during recessions that aren’t as relevant as what I see as the biggest story when one talks about an over-produced commodity crop, which is policy. Furthermore, policy is what has driven down exports and feed demand for corn in recent years.

If we were dealing with a commodity that feeds the world’s growing populations, like Jim Rogers always tells investors, the price of corn would go up because of natural, growing demand. Instead, we’ve had overproduction of corn for decades on end, and it feeds agribusiness, not the world’s growing populations. The Energy Independence and Security Act of 2007 created a new and rapid demand for this input-heavy crop, rewarding the producer, the machinery maker, the fertilizer, seed, and chemical companies. Policies have supported corn growing both on the demand side, and through direct payment programs and crop insurance.

If we really wanted food and energy security, we’d promote fuel efficient vehicles instead of Chevy Tahoes and F350s that burn E85, and we’d preserve our soil, waterways, biodiversity, and aquifers so that future generations have healthy land on which to grow food.

Corn and soybean production in America today is mostly all about policy.

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SOYBEANS
Also interesting is the same information on soybean profitability as viewed on the following graph:

Source: Ag Cycles: A Crop Marketing Perspective By Chad Hart/Iowa State.

We can generalize that soybeans have, on average, had more profitable years than corn. They have enjoyed a boost in price, too, as a consequence of ethanol’s recent, large demand for corn. Plus, around 15 percent of our nation’s soybean crop is going to produce biodiesel these days.

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SOURCE: Ag Cycles: A Crop Marketing Perspective

3 Picks: Ogallala Aquifer, Biofortified Millet, Agriculture Students

Below, are today’s three chosen agricultural-related news picks.

1) Kansas State Study on Ogallala Aquifer Use: “If current irrigation trends continue, 69 percent of the groundwater stored in the High Plains Aquifer of Kansas will be depleted in 50 years. But immediately reducing water use could extend the aquifer’s lifetime and increase net agricultural production through the year 2110. Those findings are part of a recently published study by David Steward, professor of civil engineering, and colleagues at Kansas State University. The study investigates the future availability of groundwater in the High Plains Aquifer—also called the Ogallala Aquifer—and how reducing use would affect cattle and crops.”

2) Scientists Deploy Iron-Rich Pearl Millet Against Malnutrition: “Iron-rich pearl millet is being conventionally bred by ICRISAT as part of the HarvestPlus program, which seeks to develop and disseminate staple food crops rich in micronutrients to improve nutrition and public health. One recently released variety, ICTP8203Fe, commonly known as Dhanshakti (meaning prosperity and strength), is now being cultivated by more than 30,000 farmers in Maharashtra. It is the first biofortified crop cultivar to be officially released and adopted by farmers in India.”

3) Iowa State sees largest enrollment in the College of Agriculture: “Expectations are high in the College of Agriculture and Life Sciences(CALS) this year, with the college anticipating approximately 4,000 undergraduate students for the fall of 2013. The past two years have trumped the last undergraduate enrollment record set back in the fall of 1977, which had 3,623. … For the past 15 years, the employment rate of agriculture and life sciences graduates has been at or near 98 percent, acting as a driving force behind the record numbers in enrollment.”

This news post was written and compiled by K. McDonald.