A Bad Year for Grain Farmers? All it Takes Is Average Yields
WASHINGTON - At current prices, grain farmers are unlikely to make money if the record-high yields of 2017 retreat to average levels, said University of Illinois economist Gary Schnitkey during a farm income discussion at USDA's annual Outlook Forum.
Growers have faced a similar combination before and "that resulted in zero income in 2015," said Schnitkey. Farmers are more likely to make money if they own or share-rent land. Cash rental rates remain too high, on average, said Schnitkey, who based his presentation on a database of 5,500 central Illinois farms. Looking ahead, it will be "very hard to generate positive cash flow" absent higher yields or higher commodity prices.
USDA projects corn yields of 173.5 bushels an acre this year, down from the record 176.6 bushels of 2017. Soybean yields are projected at 48.4 bushels an acre, compared with 49.1 bushels last year, the second-highest yield on record. The projected corn yield would be the third highest ever.
Economist Wendong Zhang, who oversees the annual farmland value report by Iowa State University, forecast that land values will hold steady or decline slightly in coming years. Low farm income and rising interest rates will weigh on bids for land. Farmland accounts for 80% or more of a farmer's assets, so changes in value can affect the owner's financial health.
Earlier this month, USDA forecast net farm income of $59.5 billion this year, lowest since 2006, the early days of the commodity boom that collapsed in 2013.