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Big yields, low prices – Audio

Paul Mitchell, Extension Agricultural Economist
Department of Agricultural and Applied Economics
UW-Madison College of Agricultural and Life Sciences
pdmitchell@wisc.edu
(608) 265-6514, (608) 263-3964
NOTE: First in a series for 2017 Wisconsin Agricultural Outlook Forum Jan. 19
2017 OUTLOOK FORUM REGISTRATION INFORMATION
http://ecals.cals.wisc.edu/2016/11/28/registration-open-for-2017-wisconsin-ag-outlook-forum

AGENDA & REGISTRATION
http://agoutlook.cals.wisc.edu/

3:01 – Total Time
0:17 – 2016 big yields, low prices
0:49 – Coping with negative margins
1:16 – Value of exports
1:43 – Some relief in 2017
2:29 – Know your costs
2:53 – Lead out

TRANSCRIPT

Sevie Kenyon: The Wisconsin agricultural scene in review, we’re visiting today with Paul Mitchell, Department of Agricultural and Applied Economics, University of Wisconsin-Madison/Extension in the College of Agricultural and Life Sciences and I’m Sevie Kenyon. Paul, give us an idea what 2016 has been like for our Wisconsin growers.

Paul Mitchell: We had awesome crop yields this year. Very high corn yields, very high soybean yields, some people are setting their own personal records, some counties will set their own historical records for yields per acre, but at the same time costs have been high for growers to put these crops in and farmers are looking at negative margins even with these high yields. The markets weren’t there, it’s a lot of corn, a lot of soybeans to push through the market and it’s rough for some people out there even if with these really high yields.

Sevie Kenyon: How do farmers cope with this kind of situation?

Paul Mitchell: This is a year some people aren’t going to make money and they’re going to be eating equity. They’re going to be living off of past year’s income stored away as farm equity, other farmers have other jobs, often households are multiple sources of income and the one thing I really picked up is there is a lot of stress for some people out there financially, dealing with the low prices relative to the cost of production.

Sevie Kenyon: What factors are contributing to this situation?

Paul Mitchell: The biggest one is the excess supply. We ended last year with a good crop year and this year was a stellar year in terms of yield. International markets matter a lot, excess grain, we are the world’s largest producer of corn and soybeans and we export a lot of that and even an extra percentage point that doesn’t get exported it puts a lot of downward pressure on prices locally in the U.S.

Sevie Kenyon: Paul, what do you see down the road in 2017?

Paul Mitchell: Well the market showing prices are where they are, the December futures are creeping up for the 2017 crop year and the 2018 crop year, but the cost of production is still high the margins are going to get where the farmers are going to make a little bit more or lose less depending on their own internal cost structure relative to these prices. We’ve seen some downward pressure in cost it’s not just farmers that are dealing with this we’ve seen the merging going on with the seed and chemical companies some of that is due to the price pressure farmers they can’t buy the seed at the same price they were paying in years past and so the companies are responding as well, John Deere, Caterpillar these companies have had to go through restructuring and layoffs as well.

Sevie Kenyon: Paul, got any advice for farmers facing the new year?

Paul Mitchell: First thing I always tell them is to know the cost of production it’s not the average cost of production, it’s your own personal cost of production and that takes a lot of time to sometimes sit down and figure out what exactly are your inputs structures, how much overhead you have in terms of buildings, machinery, your shop, understanding that, that’s the start. After that you can start looking for places to save costs, work with your advisors communicate with your lenders.

Sevie Kenyon: We’ve been visiting with Paul Mitchell, University of Wisconsin-Madison/Extension in the College of Agricultural and Life Sciences and I’m Sevie Kenyon.