Grain Prices Are Down; Not Affecting Local Economy
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| Image courtesy of the News Tribune |
It wasn’t too long ago farmers celebrated record-high grain prices.
In August 2012, corn topped $7.60 per bushel and soybeans passed $16. But since then, grain prices have decreased steadily, with corn currently below $4 and beans hovering just above $9. So with less money coming into farms, how does that impact surrounding communities and non-farmers?
As with many big questions, the answer is “It depends.”
“Some farmers have off-the-farm jobs,” said McNabb-area farmer Austin Pletsch. “Some people live off the farm income.”
That can make it difficult to track how crop prices impact the farmers and how they spend money.
Willard Mott, agriculture program coordinator at Illinois Valley Community College, pointed out that many of the effects of spending habit changes would be felt in the agricultural sector.
“Historically, when we have low commodity prices and farmers aren’t generating as much revenue they aren’t spending as much in other areas of agriculture,” Mott said. Expenditures such as machinery or fertilizer become reduced. “When a farmer makes less money, they’re going to spend less on inputs.”
Input costs are the expenses a farmer incurs growing the crop, things such as seed, fertilizer and pesticides, but also drying costs after harvest as well as equipment repairs, fuel and pay for any hired employees, according to the Illinois Farm Business Farm Management Association.
“That’s probably one of the biggest impacts because, when you look at the local economy, anyone who is involved in the input sector is going to see this ripple effect,” Mott said. There’s only so much money that can be saved, however. “We’re still going to farm the same number of acres.”
Not only have crop prices decreased, but input costs have been rising. In the 10 years from 2006 to 2015, input costs per acre nearly doubled for both corn and soybeans, according to the association. That may not mean farms are generating less profit, however.
“We’re in a strong position to face what challenges come ahead,” Mott said.
Citing the agriculture crises of the 1980s, Mott said a lot of things have changed since then. There are programs to protect farms in case of lost crops.
According to data from the North Central Illinois Economic Development Corp., agriculture employs 2.6 percent of workers in La Salle, Bureau and Putnam counties. Compare that to about 21 percent that work in the retail.
Agricultural productivity towers over that of the retail sector.
In 2012, the year grain prices peaked, cash receipts across the tri-county area topped $1 billion dollars. That same year in the same region, retail sales were about $2 billion, only twice as much despite having ten times the workforce of the agricultural sector.
Ivan Baker, president and CEO of the North Central Illinois Economic Development Corp., said there is always fluctuation.
“If 2.6 percent of the area has less income, 2.6 percent has less disposable income,” Baker said.
He said luxuries are the first to go, such as staying in versus eating out or buying a used car versus a new car.
But while farms and agriculture face increasing expenses and decreasing profits, it doesn’t seem to have affected the over all spending in local communities in any uniform way.
Using information from the Illinois Department of Revenue, sales tax receipts for communities in La Salle, Bureau and Putnam counties have mostly increased as grain prices have decreased, especially in larger communities such as La Salle and Peru. Peru saw a nearly $2 million jump in sales tax revenue between 2012 and 2016.
In smaller communities, the change in revenue has been less than consistent. For example, Lostant and Hennepin have seen revenues increase, whereas Tonica and Wenona have seen decreases.
Perhaps it’s because, as Mott said, the farms still are doing well.
“Business is normal,” Pletsch said. “We haven’t been splurging. We’ve been making smart business decisions.”
Source: News Tribune