Can you imagine paying your boss around $6,000 for the opportunity to work this week? Getting no benefits? No paycheck? No time off or contribution to your 401K? That’s what farmers are doing this year …
Corn prices are right now below the cost of production.
It’s one thing to say that, and another to understand what it really means.
First, you have to realize that every farm is a small business and every farmer will opt to run his farm in a different way. Some will own their land, others will rent it, and others will crop share with their landowners. Some farmers will get rain or drought or disease on their farms and others won’t. For every farmer and for every farm, the production practices and input costs can vary SIGNIFICANTLY.
Still, understanding that, we can make a few assumptions. An average cash rent price per acre is $350. Average production costs per acre are around $500 (this includes fuel, seed, fertilizers, etc). We can assume that for many farmers, they paid around $850 per acre to put a crop in the ground and get it to grow.
Corn prices today are around $3.50 per bushel. A reasonable Illinois average is 180 bushels per acre so we can calculate out that a farmer could make $630 per acre if he sold his crop today for cash.
It doesn’t take a mathematician to figure out that a farmer is losing around $220 per acre on his crop this year.
He is actually paying his farm for the privilege of farming.
Taking that a step further, if an average Illinois farmer is farming 1,500 acres, he’s losing $330,000 this year. Money that should be going to make payments on tractors and combines. Money that should be paying for his family’s insurance coverage. Money that could be buying next year’s seed.
A loss like that puts a gain in previous years in perspective, doesn’t it? Farmers must save in the good years to cover the bad. Thus, farmers never really “get rich.” They just try to make enough to raise their family year after year.