With corn and soybean prices dropping below the cost of production for the 2025 crop, the idea bandied around social media, the local watering hole or anywhere more than two grain farmers gather is this: Can commodity farmers leave some acres idle?
The idea is that shorting supply will increase prices. The challenge is how a farmer can do that without shorting the business’s supply of cash.
“I would be hard pressed to let $20,000 an acre dirt sit unused for a year in a bid to potentially reduce corn or soybean acres,” says Mike Pearson, a grain market analyst who also is the broadcast director at Farm Progress.
That said, Pearson says, “The need to reduce commodity crop acreage is important. And I think that's something as an industry we're going to be grappling with over the next several years.
Pearson, speaking on Ag Marketing IQ In Depth, says: “The real question is what do we do instead here across much of much of rural America?”
Pearson suggests farmers look for a way forward by taking a tip from 1970s agriculture in the U.S.
“We’re at a period where now we can afford to try some things that maybe haven't made a lot of sense for the past 40 years in the ag industry. And I think those farms that are willing to try some new things, willing to step out of their comfort zone, I think those are going to be the farms that handle this transition period the best.”
Pearson looks at two priority topics:
Can the U.S. pull the export market to China away from Brazil?
His answer: probably not.
It’s evident from market activity starting with the Trump’s initial trade war accelerated in 2018 that Brazil could accelerate soybean production quickly enough to run away with that market, Pearson says.
“We gave China the incentive to drive soybean acres much, much higher in Brazil,” Pearson says. “We knew all of that in 2017 and 2018. So, to hear so many folks in the ag industry now reacting with surprise that China isn't purchasing our soybeans, to me is a little disingenuous because for 10 years we've known this was the direction China was going.”
What can Midwest farmers grow to complement their grain acreage?
His answer: specialty crops.
What that looks like, perhaps, is a mix of higher risk crops — fruit, vegetables and other specialty produce — and commodity crops. Those are the crops California still grows but not at the level they once did – and that acreage continues to go down. Where California once had ample water, land and labor, those assets have fallen in short supply. Land is expensive. Water is scarce and labor is scarce and expensive.
Pearson suggests large commodity farmers focused on an export market diversifying to add smaller, perhaps niche, production of crops for domestic consumption. Lower interest rates and consumers focused on buying local and knowing their farmers are going to combine to help make sure ventures successful. Farmers will work grain acres alongside specialty acres to increase margins and accelerate cash flow.
“We've got sort of a perfect storm coming together that will create some opportunities,” Pearson says. “There are some substantial challenges we'll have to grapple with to get this to fruition, but I think that's the direction we as an industry need to start heading.”
Hear more about this opportunity for grain farmers to become disruptors on Ag Marketing IQ in Depth.