Corn and soybean prices are up more than 20% from a year ago. These are the crops which feed the cows and pigs and chickens you eat.
Farmers have some cash, and equipment makers have had a great run on Wall Street. John Deere shares are up over 40% this year.
Illinois farmland values jumped 20% in just six months!
So why are farmers so unhappy?
I’ve talked about this before. Farmers are always worried, they’re conservative by nature, they only see dark clouds on a sunny day.
CNBC sent me to the Farm Progress Show in Decatur, IL, this week to find out what could possibly be worrying farmers. FPS is the largest outdoor farm equipment show in the country.
Here are five issues keeping farmers up at night, and how those issues might affect your food prices.
You can’t take advantage of high prices when you can’t grow, and much of America’s breadbasket is gripped by severe drought. For example, only about 10% of the corn crop in North Dakota looks “good to excellent” right now, compared to 60% this time last year.
Less corn = higher prices = higher meat prices.
— Hurricane Ida.
The massive storm closed ports in southern Louisiana that are responsible for shipping out most U.S. corn and soybeans exports. So far, it’s not a big deal in the upper Midwest because they haven’t started to harvest, but it could become a huge issue if operations don’t resume soon.
Fewer exports = a glut of corn at home = lower meat prices.
When corn and soybean prices rise, so does the cost of fertilizer! Like, all of a sudden! What a coincidence!
Illinois farmer Mike Stacey tells me his fertilizer costs are up as much as 80% this year. Even though he’s making more money, he’s not netting more profit.
Farmers worry that when corn and bean prices eventually fall, fertilizer prices won’t fall as fast. (It’s like when gas prices shoot up as the cost of oil rises, but when oil drops, prices at the pump take their time coming down).
Higher costs = higher prices. Period.
Unbelievably, nearly half the corn grown in this country goes into ethanol. Some farmers sell their entire crop to ethanol plants. So when members of Congress occasionally try to remove mandatory ethanol from gasoline, farmers squeal.
This time around, California Democratic Senator Dianne Feinstein is leading the charge to end the ethanol mandate. She says there are greener alternatives. Even if she’s right, she doesn’t have a chance in hell of succeeding. Big Corn is too big to fail.
Farmers should be more worried about Elon Musk and the oncoming wave of electric vehicles. I didn’t see any Teslas this week in the heartland, come to think of it.
No ethanol = lots of corn = lower prices for meat.
This is the one issue which absolutely terrifies farmers. The President wants to pay for some of his new programs by getting rid of the “step up in basis” on some inherited properties. Currently, when you inherit a piece of property, you are taxed based on the value of the property at the time you inherit it, not what it was worth back when your parents bought it. This saves you a ton in taxes.
Farmers fear if the President removes the step-up in basis for farms, their heirs might have to sell the farm just to cover the taxes.
The President has specifically said family farms will be exempt from any tax changes, but more than a few people at the Farm Progress Show don’t believe him.
No step-up basis = fewer family farms = ?
Should farmers be worried? Aren’t they always worried? Have at it in the comments, or email firstname.lastname@example.org