In most sectors of the economy, low prices and high inventories trigger an increase in demand for the goods or products, as consumers take advantage of low prices. The supply of livestock to consume feed grains is relatively fixed at any given time. It would be difficult as a nation to eat much more. If chronically high inventories and low prices indicate production overcapacity, then we would expect an industry to respond by downsizing its productive capacity. And, in nonag sectors, that is usually what is done.
Plants are closed and industry capacity is reduced.
The plant and equipment are sold for use in another industry, an industry that is expanding. But in the case of agriculture, when inventories continue to increase and prices remain depressed, farmers are forced out of agriculture but the land is not. The farmland is taken over by other farmers and corn, soybeans and cotton are produced just as before. Productive capacity remains unchanged or is changed very little. The situation of near-record low prices for major crops and soaring stock levels that underlie the current farm income crisis results from a combination of economic and policy conditions operating in this unique agricultural market.