While I'm on it. Farm subsidies subsidize YOUR food, not the farmers pocket book. Yes farmers get the money, but the idea is that the farmer is subsidized so he grows corn, beans, wheat, whatever so that there is enough of it to keep the supply high and the cost low. It also helps to stabilize the markets on a normal year. What we are seeing here is a crop failure causing high prices because there won't be enough. It's not that the subsidy program didn't work and the farmers just got rich, it's that it did work, in fact in May it looked like a record harvest would happen and commodity prices would plunge to around $2 for corn, but then the drought hit and all that corn was lost. So now you have $8 corn. In fact many farmers made the mistake of selling at $4.50 cents this spring because all the reports led to a bumper crop.
this is why i hate subsidies id rather just have the crop priced at the appropriate level instead of the subsidies. If that would happen i think that farmers would be more profitable, problem is people want no subsidies and low food costs. Part of me wonders if the high prices this year, will move food prices up toward where they would need to be without subsidies. Farm bill will be interesting if they ever get it done.
Back in the spring one of my friends was braging that hed forward contracted 75% of his expected crop for $4.70 and we were all only going to be getting $2 for ours because of the bumper crop. Spoke to him the other day and hes contracted way over production and is going to have to buy $8 corn to sell at $4.70 to fill his contracts. That would hurt, and they are probably one of the best run opperations in the area so it can happen to anyone.
Most people dont know that most of the corn is still available in the form of ddgs after the ethanol process. THere are problems with feeding ddgs to poultry because the toxins are more consintrated in ddgs if they are present. I would actually expect meat prices to drop this fall, because of the high costs associated with feeding cattle so long, many are selling, so there is an excess of meat hitting the market. Many people are having to sell off herds that they have spent a lifetime building because there isnt any feed to be found at any price. THis sell off is happening at depressed prices because no one has the feed stuffs to overwinter these cattle. I know of two local farmers that are having to sell large numbers of cattle because their neighbors were burning trash and it got away and burnt down their hay barns. Thats why there is a burn ban idiots. Fortunatly im in good shape on hay and have only had to feed a few bales so far. I think ill be fine up till sept 1 without a rain.
We have revenue insurance on our corn so say for simplicities sake our historic average is 100bpa, we insure 75% of our normal production for the average. The price for these bu is and average of spring and fall price that will be set the end of october. so say the average price is 7.50, 75x7.5=$562.5. our corn averaged 60 bu so 60x7.5=450, so wed be looking at an insurance check of $112.50 per acre. Which is about $22.50 an acre more then we estimate this year at average yields and prices. Thats a very very oversimplified example, and i rounded our historic average down some to simplify the math, but yes because of crop insurance we will make 22.5 more then if we had raised a normal corn crop at normal prices.
Most policies are catastrophic policies not revenue and only pay out a minimum. the revenue insurance is very pricy, but with the widespread drought this year looks like a wise investment. In our area our bean base levels are so low that it doesnt pay to have a revenue insurance policy and most carry a cat if anything. I know most of our landlords dont carry any type of insurance on their share of the crop. Dad always said the corn pays the bills and you live on the beans, so the prospect of having a second straight year of low to no soybean yields is very stressful for many.