Bountiful Harvest for 2018

October 10, 2018

Harvest in West-Central Illinois is winding down as I write this. Heading into 2018, the United States had experienced above trend line yields for four consecutive seasons; previously, the country had not had even three in a row. Earlier this year, some thought perhaps 2018 would give way, that we “were due” a disappointment. That thought is a distant memory now as 2018 is well on its way to a fifth consecutive above trend line year. We aren’t going to be just above; Illinois as a state is going to break some records along the way.

From the get-go, this growing season has been agreeable on the whole. Sure, we were a little dry and had an issue here or there, but there was never a huge curveball thrown our way. It seemed to rain at least a little precisely when we needed it. The wide-sweeping disease or insect threat never materialized on a grand scale. From start to finish, the 2018 season was steady. I felt like a broken record as I wrote my management clients to keep them informed about the growing season. I think I said “the prospects are there for a great crop” no fewer than 13,297 times from April to September. Across the board on farms of various qualities, yields are extremely high. Not just that, on quite a few farms, we are seeing higher yields than ever before. Simply put, the production levels thus far have been incredible. It is the best we have ever seen from top to bottom.

In a somewhat cruel twist of fate, this amazing production is part of the problem facing commodity prices. As recently as September, we were trading at 10 year lows on soybeans and near 10 year lows on corn. Five straight years of ample American production has stocked the bins. We were already sitting on an enormous pile of inventory before this mammoth 2018 crop even left the field. The supply and demand scales aren’t tipping in our favor in regards to commodity prices. On top of all of this, the ongoing trade dispute and tariff situation plays a role. That could be its own separate article, but suffice it to say, foreign policy issues and an enormous supply create a two-headed monster that is eating away at the value of American grain. Soybean prices are down approximately 50% from where we were five years ago, and 25% from where we were just five MONTHS ago. While corn hasn’t been as aggressively affected by the trade dispute, the values we saw just a handful of years ago are long gone.

Fear not, I am a “glass half full” kind of guy and there are things worth celebrating! While the values aren’t there, we are producing a great deal of grain. So, while the corn and beans aren’t worth what we’d like, we have more of it to sell than usual, which should help soften the blow. We are also seeing farm efficiency and technology like never before. Five years of above trend line yield doesn’t happen by sheer luck. Simply stated, the Illinois farmer is getting really good at producing grain, regardless of what cards they are dealt. When all is said and done, the 2018 growing season will be unprecedented for reasons both good and bad. But, let us all rejoice in a bountiful harvest.

Author: Luke Worrell – Managing Broker, Accredited Farm Manager, Accredited Land Consultant