Corn prices keep slumping, and farmers keep planting more

Corn farmers are throwing another government-backed Hail Mary this year, planting more of the crop than in 2019 even though prices are near the bottom of a six-year slump.

"They call it plant and pray," said Al Kluis, a commodities broker in Wayzata. "What you want is a disaster in some other part of the Corn Belt or some other country."

Favorable weather in April helped most Minnesota farmers get corn in the ground faster than last year, when a wet spring kept them out of some fields until June and some cornfields were never planted.

But despite all those problems, the 2019 crop yielded the sixth-largest harvest of all time. The U.S. Department of Agriculture now projects a record corn harvest in 2020.

"We have no problem producing the crop," said Brian Thalmann, a farmer near Plato and past president of the Minnesota Corn Growers Association. "We've had seven years now of steadily increasing production, and we've never had that before."

Demand can't keep up with supply. Corn futures hovered around $3.15 per bushel last week, nearly a dollar less than a year ago.

Farmers came into the spring with a large inventory of corn in storage, and demand for the commodity has been hit on multiple fronts since the onset of coronavirus.

Ethanol plants have shuttered due to decisions by the Trump administration to exempt oil companies from ethanol standards and, more recently, the cratered demand for all types of fuel caused by the coronavirus pandemic. Ethanol production is running about 70% of capacity, Kluis said.

Meanwhile, the shutdown of restaurants and idling of meatpacking plants that have led to farmers euthanizing chickens and hogs means the need for corn to feed livestock will probably drop about 20%.

"Usually the cure for low prices is low prices, but that's only true if demand improves with lower prices," Kluis said. "Right now we have the worst of all worlds."

Yet farmers have increased their corn acres. That's partly because they invested in seed, fertilizer and other inputs before the heavy effect of coronavirus was known, said Mike Peterson, a farmer near Northfield.

"Part of it is your guarantee on your revenue, part of it is your crop rotation, and just the general economics of a lot of this land is leased, you've got to try to be productive somehow," he said. "Farmers are trying to be optimistic that prices will recover."

Peterson planted 400 acres of corn this spring. He acknowledged that the best thing for Minnesota corn farmers would be a weather catastrophe in some other part of the Corn Belt or Brazil or Argentina.

"That's a disheartening part about production agriculture right now, is you only really have success if some other farmer has a bad year," he said.

The problem of corn oversupply can't be solved by any one farmer, Peterson said.

"It's economic suicide to try to fix the supply issue yourself," he said. "You're not going to drive by acres that aren't producing anything, and there's just not another crop out there.

Corn and soybeans are our choices. I think we do need more diverse cropping practices and more diverse markets, I really do."

Thalmann said farmers are investing in and hoping for a payoff from research into new uses for corn, such as corn-based plastics.

Ultimately government support is what makes corn-growing tenable, if not necessarily profitable. The most recent farm bill includes something called price loss coverage, which pays farmers the difference when the average corn price falls below a certain level.

Also, crop insurance, which is 60% taxpayer subsidized, sets guaranteed revenue for corn at $3.88 per bushel this year.

"Without crop insurance, there's not a bank around that would loan any money to a farmer," Thalmann said.