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Corn Price Range Opens Wide Potential Income Window -- Expert

About 4 bucks. That's the key figure to watch moving forward in pegging your farm income in the next few years, one expert says.

A corn price around $4.20 a bushel combined with "above-average yields" would result in farm income slightly below the average from 1996 to 2005, according to University of Illinois Extension ag economist Gary Schnitkey.

The likely corn price range and yield create a wide income potential range -- wider than normal, Schnitkey says. That's based on a decade of data from Illinois Farm Business Farm Management that foreshadows lower grain farm incomes for the next year. How much lower?

"Average grain farm incomes in 2014 likely will be much lower than 2013 incomes. Corn prices near $4.20 per bushel combined with above-average yields could result in average incomes on grain farms in Illinois around $45,000 per farm, slightly below the average for the years 1996 through 2005.  A scenario that would result in average incomes near $134,000 per farm, the 2013 level of average income, would be above-average yields combined with corn prices near $4.80 per bushel," Schnitkey says. "This is a large range ($45,000 to $134,000), and it represents the likely range of average grain farm incomes over the next several years, with lower incomes possible if low commodity prices occur."

Nonland input costs are seen slightly higher for this crop year. So are crop insurance payments and projected corn yields. The latter alone is bearish enough, but far from a certainty at this point, Schnitkey admits. Overall, he sees $4.20 per bushel to be a safe bet for a yearlong average corn price, down from $4.65 a bushel for last year's crop.

"For higher prices, income projections are given for a $4.65 corn price and an $11.25 soybean price, levels slightly above expected long-run averages.  Continued strong demand for grains could result in these price levels. At these price levels, average net income is projected at $108,000. A change in price from $4.20 to $4.65 for corn, an increase of 45 cents per bushel, has a large impact on incomes," Schnitkey says. "For lower prices, a $3.75 corn price and a $10.25 soybean price are used in income projections. This scenario results in $7,000 of average net income. This scenario assumes that farmers enroll in the ARC commodity program and that ARC makes $40 of payments per corn base acre. The other farm program alternative, Price Loss Coverage, would not make payments at these projected prices.

"Given above-average yields, 2014 incomes would reach the 2013 level of $135,000 average per farm if corn price was $4.80 per bushel and soybean price was $11.50 per bushel. Given average yields, 2014 incomes reach the 2013 level at a corn price of $5.05 per bushel and a soybean price of $12.00 per bushel," he adds.

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