Bumper crop blues: Farms squeezed by falling corn prices, rising costs

A bumper crop of corn this year is good news for consumers and bad news for farmers as prices are falling. (istock photo)

The U.S. Department of Agriculture expects farmers will harvest more than 14 billion bushels of corn this fall for the first time. That may be good news for consumers, driving down one factor in meat costs. But it's tough times for grain farmers: The falling prices that follow fat supplies and record crops are being met with higher seed prices (from suppliers like DuPont) and continued high fuel and other operating costs, driving down grower operating profits from $5.04 a bushel in 2011 to just 3 cents this year, reports Ryan M. Connors, water and ag analyst for Janney Capital Markets in Philadelphia, citing USDA data.

"Severe pressure on farm profitability" will likely continue into 2015, depressing farm machinery and irrigation sales and making it tougher to finance farm purchases at today's increased property prices, he adds. On the other hand, reduced demand will likely moderate fertilizer prices.

And while the nation's many corn farmers feel the squeeze, "dairy and livestock are faring nicely" with lower feed costs, Connors adds. Existing farms will manage, but the collapse in operating margins, which were relatively fat for most of the late 1990s into last year, will likely slow U.S. farm expansion and investment in the near future, the analyst concludes.