Current corn prices are lower than break-even prices and could be expected to remain that way for a while, says Dr. Gary Schnitkey of the University of Illinois. Schnitkey released an excellent article yesterday describing the increase in break-even corn prices from 2004 to 2013.
“Break-even corn prices have increased from $1.67 per bushel in 2004 to the mid-$4.00 range in 2013 and 2014. Mid-$4.00 break-even prices will cause losses when corn prices are in the in the low-$4 range or below. There are good possibilities of prices being below break-even prices over the next several years.”
While farmers should be able to weather a short storm like this one following several high priced years, the long term implications of corn prices below break-even is important to recognize.
According to Schnitkey, “Corn prices in the low $4.00 and high $3.00 per bushel range are possible over the next several years, leading to the possibility of losses.”
He further states, “There are some possibilities that break-even prices may decline over time. Non-land cost could decrease; however, this process will be slow and there are limits to likely non-land cost decreases. Further decreases in break-even prices are possible with cash rent decreases. However, cash rents tend to be "sticky". This suggests a protracted period of losses would have to occur before cash rents decline.”
Read the full article at: http://farmdocdaily.illinois.edu/2013/11/break-even-corn-prices.html