The economic hurricane trashing Wall Street has done more than demolish 401(k) plans: It has also created a nightmare scenario for corn and soybean farmers.

Corn and soybean market prices have crashed in the past three weeks, falling 24 percent since Sept. 26. The market price Wednesday for corn in Daviess County was under $4 per bushel, a far cry from the $5.50 purchase price in August — and worlds away from June, when corn was bringing more than $7 a bushel.

Not so long ago, it seemed like farmers who grew either corn or soybeans were guaranteed a hefty profit. But no one counted on a stock market tornado and financial chaos. Now, instead of making a profit, farmers won’t earn enough from their corn and soybean to even recover the cost of planting and harvesting the crop.

“For now, the boom is over,” said Chris Hurt, an agricultural economist with Purdue University. “The issue is one of fear, almost, for portions of the ag sector — the cropping sector in particular.”

World demand for U.S. corn and soybeans coupled with increased interest in biofuels like soy diesel and corn ethanol combined to drive up corn prices for much of the year. But high fuel prices drove up the cost of planting and fertilizing the crops.

“The corn and soybeans being harvested now are below costs” of production, Hurt said.

Purdue agricultural economists estimate, when all forms of production costs are factored in, it cost farmers $4 per bushel to grow corn this year, while the market price for corn in Daviess County was $3.80 per bushel Wednesday.

The estimated production cost of soybeans is $9 per bushel, but the market price for soybeans Wednesday was $8.50 per bushel.

The projections for 2009 had been for a substantial increase in crop production costs, Hurt said. If that holds true, farmers will have to make major adjustments to how they grow grain crops, such as cutting back on fertilizer use and curbing the movement toward genetically modified grain.

“Everything has shifted (since) Sept. 26 from, ‘everything is going fine,’ … to ‘now, we can’t even cover our costs for 2008, and we’re in a terrible situation for 2009,’ " Hurt said.

The economic downturn has brought oil prices tumbling, which will help farmers next year if gasoline prices are lower than they were in 2008. But that doesn’t necessarily mean economic conditions will improve for American grain producers.

Global demand for U.S. grain has been high in recent years, and a relatively weak dollar meant other countries could purchase more American corn and soybeans with their currency. But a worldwide recession will likely mean other nations will purchase less American grain.

Also, the dollar is gaining strength against other currencies, so countries that do buy grain from the United States will have less purchasing power than before, Hurt said. If those conditions are sustained, exports of U.S. beef and pork will also decline.

“We probably are seeing a lot of worry (from) the livestock and animal sector,” Hurt said.

Cattle futures have declined 9 percent since Sept. 26, and pork futures have decreased 8 percent. While market prices have fallen for livestock producers, there is at least one bright side.

“The prices for feed are falling much faster” than cattle and hog prices, Hurt said. When competition for grain was causing corn prices to spike, livestock producers were forced to pay exorbitantly high prices for feed grain. Falling corn prices give livestock farmers some relief.

There isn’t any federal help for grain producers, at least not at this time. Although there are federal programs to compensate farmers when grain falls below a given floor, prices will have to fall a great deal more before such programs kick in, said Dan Styke, of the Daviess County Farm Service Agency.

For farmers to receive “loan deficiency payments,” corn prices would have to fall below $2.11 per bushel, the designated price floor (or “loan rate”), Styke said. The loan rate for soybeans is $5.20 per bushel, Styke said.

Farmers who own land saw the value of their farm properties increase 78 percent between 2004 and 2008, Hurt said. “The really good news is U.S. agriculture did not take on a lot of new debt,” Hurt said.

Farmers preparing for the 2009 growing season should not lock in fuel and fertilizer prices now, Hurt said. Those prices will likely decrease and seed companies may offer incentives to farmers. Rent for farmland may also decline, as a reflection of falling grain prices.

Much of the demand for corn was driven by the ethanol industry. With the downturn, the newest ethanol plants are surviving on meager margins.

“Since June, they’ve lost a lot of money,” Hurt said. “All summer and this fall, their margins have been razor thin, especially the new plants.”

Author: James Mayse, Messenger-Inquirer, Owensboro, Ky.