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Crop Profits Wither Away High Fuel Prices, Low Market Prices Have State Farmers Cutting Costs

Posted on: Wednesday, 26 October 2005, 21:00 CDT

By Ryan Bradley Medill News Service

Seated in the quiet, air conditioned cabin of his combine, Steve Ruh surveyed his soybean and corn fields. A hilly section of his 3,000-acre Sugar Grove farm stretched before him, Ruh turned on the mammoth combine and steered into his soybean plants.

This year's crop doesn't compare to the record harvest last year. "It's kind of like winning the Super Bowl and then going 3- for- 12," said Ruh, 36.

A mid-summer drought scare has been replaced by a veritable smorgasbord of ills, including increases in the prices of natural gas, oil and fertilizer. With much of the fall harvest already completed, and grain market prices increasingly unfavorable, Illinois farmers such as Ruh are doing all they can to cut costs.

Spring arrived with auspicious beginnings: wet, warm conditions even better than last year, giving farmers reason to expect another record yield.

Then summer came and the rains went.

"What you have to understand is that last year wasn't a typical year - it was like a 100-year crop," said Brad Schwab, a U.S. Department of Agriculture statistician.

This year, Ruh's Kane County farm was in a national disaster area declared after the dry summer, but he's still able to smile over his yield.

"It's amazing that even with the weather we had over the summer, the genetics of the seeds are just so much better than 10, even five years ago, that the lack of rain really doesn't effect the plants as much as it used to," he said.

With most of his crop harvested, Ruh is seeing soybean yields of 40 bushels per acre, a 15-bushel drop from last year, and corn yields of 120 bushels per acre, a 45-bushel drop.

"The lack of yield, and the drought ... is really the least of our worries," Ruh said.

The other problems begin with last year's successes.

The record yield of corn and soybeans drove prices down and induced many farmers to store their grain, hoping for higher prices later. Now, that holdover is causing grain elevator operators like Topflight Grain Cooperative in Bement, where Ruh takes his grain, to fill up. Topflight began the season holding 1.5 million bushels more grain than normal, said Scott Docherty, general manager. And that's depressing prices even as farmers run up storage charges on old grain.

Corn Monday was selling for $1.66 at the elevator, even less than it brought during the record harvest last year.

Ruh, who runs his farm with the help of his wife and 72-year-old father, and makes several trips a day to Topflight with his 1,000 bushel truck, also faces higher prices for fuel.

Farmers use a lot of fuel - both natural gas to dry corn and diesel fuel to running large equipment like combines and trucks. Ruh estimates he burns 200 gallons of diesel a day. The price per gallon is $1.05 higher than a year ago, according to the Department of Energy. Ruh estimates that costs him an extra $8 to $10 an acre. A bigger hit, though, is in the cost of nitrogen fertilizer, which is made from natural gas, said Paul Jeschke, who farms more than 3,000 acres in Grundy County.

Fertilizer prices are "the highest they've been in the 30 years I've been farming - $12 to $15 an acre higher than a year ago," he said. "When your profit margin may be $20 to $50 per acre, that really really severely effects the net income."

Much of the blame for the jump lies with Hurricane Katrina; the Gulf Coast accounts for about 20 percent of the nation's supply of natural gas. Katrina also damaged ports and barges, making it harder to dispose of the 25 percent of the crop that normally is exported.

That leaves farmers to deal with even more grain in a flooded market. For Ruh and farmers throughout Illinois, that means paying to keep more grain in storage, watching the markets and waiting for the price to rise.

Source: Daily Herald; Arlington Heights, Ill.

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