Low grain prices main driver of lower farm income.
The combination of stagnant commodity prices and lower yields, compared to recent seasons, pressured farm returns again this year. And that pattern could continue in 2020 without a major change in the trade environment or rebound in crop production.
“Incomes are back to pre-2006 levels,” Dale Lattz, University of Illinois farmdoc research associate, said at the Illinois Farm Economics Summit last month. “Lower grain prices are one of the main drivers of lower income.”
USDA recently estimated net farm income at $92.5 billion this year, slightly above the 2000-18 average but 32% below the 2013 peak.
At the local level, Farm Business Farm Management records indicate average returns on highly productive central Illinois soil this year of just $36 per acre for corn and minus $37 per acre for beans.
Statewide average yields this season are down 31 bushels per acre for corn and 12.5 bushels for soybeans.
“That’s down from the last few years and a little below trend for corn and beans,” Lattz said of the state yield estimates.
Meanwhile, issues with lower yields and prices were exacerbated this season by trade disruptions that weighed on markets, and higher harvest costs that added up to $40 to $60 per acre to dry excessively wet crops in some areas.
The six-year run of lower farm returns weighed on rural areas nationwide, not just farmers. Since 2014, GDP growth in rural counties averaged almost 1% less than in urban counties, CoBank reported.
The U of I estimates that, without a major bump in prices, yields or trade, crop farmers face the possibility of negative returns in 2020.
The stagnant farm economy could pressure farmland values and rental prices, or at least keep a ceiling on those markets, and continue to erode working capital.
Source: Illinois Farm Bureau