CHAMPAIGN — Net farm income in Illinois is projected to be sharply lower this year and next, primarily as a result of lower prices for corn and soybeans, a University of Illinois agricultural economist said.
Gary Schnitkey said the net income for Illinois grain farms exceeded $200,000 per farm during 2010, 2011 and 2012, but is projected to fall to the $150,000 range, or lower, during 2013 and 2014.
"For most farms, lower incomes will not cause financial stress, particularly as most farms have built financial reserves during the past several years," Schnitkey said.
Speaking at the 2013 Illinois Farm Economics Summit in Champaign on Monday, Schnitkey said farmers most at risk are those who cash-rent 90 percent or more of the land they farm, and those whose cash rents are at least $25-an-acre higher than the average for their county.
Those farmers may need to renegotiate their lease arrangements, reduce their capital expenditures and perhaps re-evaluate whether it's in their best interest to continue farming the land at that lease rate, he said.
One thing they shouldn't do is cut back on crop insurance, Schnitkey said.
"We're moving into a more risky period. This is not the time to lessen coverage levels," he said.
While prices paid for corn and soybeans have dropped dramatically in the past year, farmers have seen some production costs come down, Schnitkey said, citing data from Illinois Farm Business Farm Management Association.
Corn producers' costs — excluding land costs — are projected at $537 an acre in 2014, down from $581 an acre in 2012, he said.
The biggest decrease comes in fertilizer costs. The price of anhydrous ammonia, for example, dropped from $880 a ton last year to between $650 and $680 a ton this year, he said.
Darrel Good, a professor emeritus in the UI's Department of Agricultural and Consumer Economics, said he is projecting corn prices in the "low to mid-$4 (a bushel) range." But he warned "it may be difficult to maintain corn prices at even $4 next year."
That would be a sizable change from the $5- to $7-a-bushel prices paid in recent years, he said.
The lower prices come partly as a result of record-high U.S. production last year, along with more corn being grown in the rest of the world, Good said.
Since the 2005-06 marketing year, corn production outside the U.S. has shot up by 46 percent, he said.
Good said there may be some reduction in corn acres planted in the U.S. next year, but if so, it will be "a fairly minor adjustment."
On the whole, he said he expects "a large corn crop and continued pressure on corn prices" in 2014.
In response to a question from the audience, Good said, "It's hard to see a scenario where prices would move higher in the first half of 2014."
As for soybeans, Good said "we're suggesting a move down to $11 to $11.50 (a bushel)."
The export market for soybeans has been stronger than the export market for corn, he said. China is importing 24 percent of the world's production of soybeans, he added.
Key non-land costs for central Illinois corn producers in 2012
Costs2012 cost per acrePercent of total costsFertilizer$20034%Seed$10819%Machinery depreciation$559%Pesticides$498%Crop insurance$254%Fuel and oil$234%Machine repair$224%Drying$163%Other$8315%Total nonland costs$581100%
Source: Illinois Farm Business Farm Management Association calculations.