This price correction should have been no surprise to fellows. Just back in Sept. 2010 we had $3.50 corn. A world wide shortage of feed protein is what drove the markets up. Ethanol is a small player in the price run up. So with higher prices everyone ramped up production and BID crazy on rental ground. So now the results are coming in. Anyone paying over about $250-300 an acre rent for good ground is going to lose money on that very same ground. There is a lot of $450-500 an acre ground rented around here. It will take time for the inputs to fall in price. Some of them may not fall in price depending on world wide demand.
Much of this rented ground will have to have a change of tenants for the rental price to fall. My boys and I have had over ten calls from land owners wanting to rent us their ground. The trouble is they want two year ago rental prices. Most of them just will not believe that they market rise is over. The gravy train is GONE!!!
So if the fellow has a record yield it will make up for some of the lower price per acre but I think he is dreaming. The corn is not that much better where he is. The soybeans maybe but not corn. He is blowing smoke up some reporter butt. The grain only farmers are going to take a severe hit in income. They have been spending like drunken sailors and it is coming home to roost.
I know of several that have already been told that the bank is only going to allow so much for rent. Anything over that and they will NOT get operating money. This is very similar to what happen in the 1970s. Prices took off and guys started spending money like those prices would never end. The very same issue is hitting them today. They are lucky that the interest rates are low and the Government is not playing politics with the grain.
The long and short of it is there will be guys go broke in the next 6-18 months. Not way around it. There will be auctions.
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Today's Featured Article - Oil Bath Air Filters - by Chris Pratt. Some of us grew up thinking that an air filter was a paper thing that allowed air to pass while trapping dirt particles of a particles of a certain size. What a surprise to open up your first old tractor's air filter case and find a can that appears to be filled with the scrap metal swept from around a machine shop metal lathe. To top that off, you have a cup with oil in it ("why would you want to lubricate your carburetor?"). On closer examination (and some reading in a AC D-14 service manual), I found out that this is a pretty ingenious method of cleaning the air in the tractor's intake tract.
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