High operating expenses tempering Illinois farmer optimism for 2023

[January 25, 2023]  By Zeta Cross | The Center Square contributor

(The Center Square) – High operating costs are tempering Illinois farmers' optimism for 2023.

Both 2021 and 2022 were very good income years for Illinois corn, wheat and soybean farmers. Overall, most farms had good yields. Crops sold for record high prices.

“It looks like 2023 is going to be another good income year – but down from the recent years because of high operating costs,” ag economist Gary Schnitkey of the University of Illinois told The Center Square.

Production costs have “increased tremendously” on Illinois farms, Schnitkey said. It costs more than $1,000 an acre to plant an acre of corn on cash-rent land.

“The break-evens on corn are now in the $5 range,” Schnitkey said. “From 2014 to 2019, we averaged $3.90.”

Farmers need much higher prices to break even in 2023 than they did two years ago.

“There is unease about what is happening to prices and whether they will decline this year. And we will just have to wait and see whether that happens," Schnitkey said.

International demand for Illinois corn, wheat and soybeans is strong.
 

“If Brazil and South America have a less than stellar yield year and the conflict continues in Ukraine, that will take grain off the market,” Schnitkey said.

Someday, Illinois farmers will experience another low-income year, but that may be in the future, not in 2023, he said.

Illinois farmers are much better at farm management than they were 10 years ago.

“One of the clear ways to see that is the early planting of soybeans,” Schnitkey said.

Seed treatments and technologies have advanced, and farmers have taken advantage of that.

“Yields have been increasing at increasing rates,” Schnitkey said. “The seed technology and breeding has gotten much better than it was 10 years ago.”

High interest rates have made the cost of borrowing money for operating expenses double what it was a year ago. Farmers are starting the new year with double the debt that they have been used to.

“Most farmers have budgeted the higher cost of money into their situations,” Schnitkey said. “They know that good times don’t last, and they have built up their asset base.”

Higher costs that farmers have to carry in 2023 weigh on them, Schnitkey said.

“We are at such higher cost levels that any blip in prices will cause some financial pain out there,” he said.