Crops look good; farmers' returns, not so much

Crops look good; farmers' returns, not so much

A roundup of agricultural news:

URBANA — Crops are looking good so far, but the outlook for farmers' returns this year appears bleak.

That's the word from University of Illinois agricultural economist Gary Schnitkey, who recently reported that farmers could be looking at negative returns on cash-rent farmland this year.

The principal reasons: lower crop prices, lower crop insurance payments and a decrease in commodity title payments.

Schnitkey did some number-crunching for the case of a farmer growing corn on high-productivity farmland.

He found that even with decent yields this year, the farmer stands to have a negative return of $48 per acre this year, compared with a positive return of $94 per acre in 2013. During 2011 and 2012, the farmer enjoyed positive returns topping $300 per acre.

One of the big differences this year is the price of corn. During 2011 and 2012, corn was commanding more than $6 a bushel. Last year, the price dropped to an average of $4.65 a bushel, and this year the price is projected at $4.20 a bushel.

Assuming a yield of 196 bushels an acre, the farmer would have gross revenues of $833 per acre. But even though the cost of fertilizers, pesticides and storage is projected to drop, many other costs are likely to stay the same or go up.

Once non-land costs are deducted from gross revenues, the operator-and-land return would amount to $245 per acre. But steadily rising land costs are now projected at $293 an acre, and once those are subtracted, the farmer is left with a negative return of $48 per acre.

That's the worst farmers' return in the last eight years. The only other year with a negative return during that period was 2009.

Results could be different this year if prices or yields vary greatly from projections, Schnitkey said. So if the price of corn happens to go up to $4.50 or $5 a bushel, farmers may find themselves in a better situation.

"At projected yield levels, the break-even price to cover non-land costs and cash rent is around $4.50 a bushel," Schnitkey said. "Prices near $5 per bushel are needed to generate profit levels similar to 2013."

Steady increase in costs

In a separate study, Schnitkey took a close look at farmers' non-land costs last year — and found they had more than doubled since 2006.

One of the biggest cost increases was for seed, which amounted to $45 an acre in 2006. By 2013, seed costs had risen to $114 an acre, an increase of 153 percent.

The cost of fertilizers also jumped big-time, rising from $82 an acre in 2006 to $193 an acre last year — a 135 percent increase.

Last year, the cost of fertilizers actually went down from the previous year. But those savings were more than offset by increases in the costs of pesticides, seed and drying.

In analyzing costs, Schnitkey determined that direct costs — including fertilizers, pesticides, seed, drying, storage and crop insurance — make up about 70 percent of farmers' non-land costs.

Power costs — including machine leasing, repair and depreciation, utilities, fuel and oil — account for 21 percent of non-land costs. The remaining 9 percent comes from overhead costs, such as hired labor, insurance, interest and building depreciation.

What's the outlook for costs this year? Schnitkey said fertilizer costs could go down $30 to $40 per acre this year. But costs of seed, pesticides and machinery depreciation aren't likely to go down.

Non-land costs per acre are likely to stay in the high $500s and low $600s "for 2014 and the foreseeable future," he said.

Outlook bright for corn, beans

UI agricultural economist Darrel Good sees signs of encouragement in the U.S. corn and soybean crops — but is quick to point out that early-season ratings aren't good indicators of how crops actually turn out.

"Weather conditions over the past month have been generally favorable for corn emergence and development, resulting in high yield expectations in spite of more than the usual amount of late planting," he reported this week.

As of June 8, 75 percent of the corn crop in 18 major corn-producing states was rated either good or excellent. That's better than the average for the last 28 years (66 percent) at that point of the season.

Similarly, 74 percent of the soybean crop in major soybean-producing states was rated either good or excellent. That's better than the historical average of 62 percent for that point of the season.

"The critical part of the growing season for corn and soybeans is still to come," Good said. "While it is too early to be confident of U.S. corn and soybean yield potential, the markets are clearly anticipating very large crops, particularly for corn."

State crop conditions released

As of Sunday, 76 percent of the Illinois corn crop and 72 percent of the Illinois soybean crop was rated good or excellent, according to the state office of the National Agricultural Statistics Service.

For corn, the breakdown was: 23 percent excellent, 53 percent good, 20 percent fair, 3 percent poor and 1 percent very poor.

For soybeans, the breakdown was: 18 percent excellent, 54 percent good, 24 percent fair, 3 percent poor and 1 percent very poor.

In the state's eastern region, which includes Champaign-Urbana, Danville and Kankakee, 97 percent of the soybean crop had been planted and 92 percent had emerged as of Sunday.

By and large, the region has gotten enough rain. Eighty-one percent of the topsoil had adequate moisture, 12 percent had surplus moisture and 7 percent was short of moisture.

As for subsoils, 80 percent had adequate moisture, 4 percent had surplus, 14 percent was short on moisture and 2 percent was very short.

County gains farmland

Among Illinois counties, Champaign County had the largest growth in farmland between 2007 and 2012, gaining 66,012 acres, according to an analysis of agricultural census data by UI agricultural economist Todd Kuethe.

The 2012 census shows the county has 616,493 acres in farms, up from 550,481 acres in 2007.

Illinois, as a whole, lost 162,621 acres of farmland during that five-year period. Even so, 50 Illinois counties saw an increase in farm acreage over that time.

Of the state's 102 counties, McLean County had the greatest amount of land devoted to agricultural production — 692,291 acres.

Nationally, 19 states reported an increase in farmland between the two agricultural censuses. States that saw the biggest shrinkage in farmland included Kentucky (6.7 percent), Alaska (5.4 percent), Georgia (5.2 percent), Mississippi (4.6 percent) and Wisconsin (4.1 percent).

Sections (2):News, Business

Comments

News-Gazette.com embraces discussion of both community and world issues. We welcome you to contribute your ideas, opinions and comments, but we ask that you avoid personal attacks, vulgarity and hate speech. We reserve the right to remove any comment at our discretion, and we will block repeat offenders' accounts. To post comments, you must first be a registered user, and your username will appear with any comment you post. Happy posting.

Login or register to post comments