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 The
stark reality of corn net income decline is shown in estimated corn
prices. In 2021 the average was $5.79 per bushel, 2022 averaged
$6.40, and the estimated 2023 average is $4.80. The estimated 2024
average is $4.50.
Soybean prices in 2021 averaged $13.40, 2022 averaged $14.00, and
the estimates for 2023 sit at $12.90 and see a projected drop to
$11.50 for the 2024 year. Elevator bids at the end of February were
substantially below the estimates for 2024 for both commodities.
Turning to another publication from Schnitkey and Paulson on 2024
Illinois Crop Budgets, looking at Central Illinois High Productivity
Farmland similar numbers are found. Slightly higher corn yields are
used with corn at 230 bushels per acre after a soybean crop the
prior season. Soybean estimates remain the same at 72 bushels per
acre after a corn crop the preceding season. We will delve a bit
further into costs, but the corn bottom line is $223. However, that
also needs to cover the land costs in this publication. Estimated
land costs are $363 per acre, leaving a potential deficit of $140
per acre. Soybeans fare better with $311 estimated return. Deducting
the land cost still leaves a deficit of $52 per acre.
Costs are broken down into
categories including one of direct costs such as seed, chemicals,
seed, drying, storage, and crop insurance. Power costs are another
area including machine hire, repair, depreciation, fuel and oil,
utilities, and a small charge for a light vehicle.
The last area is overhead
costs consisting of hired labor, building costs of depreciation and
repair and rent, insurance, and interest costs. The financial goal
is to pay for all costs and have enough left to continue investing
in the business and be able to cover family living expenses. Some
expenses are not encountered by various growers, while others have
additional costs. One of the largest variables is the percentage of
land owned by the producer. Owning significant percentages of the
ground you are farming allows for production at a lower cost,
compared to another producer who farms mostly rented ground. Of
course, this also assumes the rented ground costs significantly more
than the ground owned.
[to top of second column]
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Like many business owners,
farmers will make decisions to help the bottom line as their
economic situation turns. Maximizing income and minimizing costs are
the goals. The trick is to accomplish this without harming your
long-term earning potential. Not applying needed fertilizer will
save money in the short term but will affect income negatively in
coming years. Delaying major purchases will save money now, but if
the tractor you were going to replace needs major repairs during a
critical time such as planting, it could be a very expensive
decision. Each operator will make the decisions best for their
operation.
There is always hope for
increased income as well, particularly if there are widespread
weather concerns. We are in a true global market, so concerns can be
at home or abroad. This isn’t the first dip in the farm economy, and
producers have dealt with similar situations before and will deal
with the present situation as well.
[John Fulton
Agriculture Consultant
Lincoln Daily News]
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