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 One
input cost which has risen significantly in recent years is the cost
of fertilizers. Lindsey Robinson, in a blog on the top challenges
for modern agriculture in 2024 says, “These elevated costs are not
only eroding profit margins but also hindering their ability to
invest in crucial areas like advanced agricultural technology, soil
health improvement practices, and essential crop diversification
strategies.”
Added to rising input costs is the likelihood of lower incomes. In
an October 7 NPR report, Will Bauer said midwest farmers “will see
decreased incomes this year, as the U.S. agriculture industry will
likely have a down year compared to the last two.”
The prediction Bauer has is that “Net farm income will fall 4.4% in
2024 — or $6.5 billion less than in 2023 — which is a much rosier
projection than the U.S. Department of Agriculture initially
predicted in February.”
Other factors also impact income. Conterra Ag’s May 2024 article “At
a Crossroads: American Farmers Under Stress” says, “Environmental
challenges, such as extreme weather events, further compound the
situation, posing risks to crop yields, livestock health, and
infrastructure.”
Furthermore, Conterra Ag notes, “These difficulties can disrupt
infrastructure and supply chains, affecting the distribution of
inputs such as feed, water, and veterinary services, as well as the
transport of agricultural products to market.” Pressures such as
“trade disputes and tariffs disrupt traditional markets and reduce
demand for U.S. agricultural exports” which can also adversely
affect farm incomes.
Another adverse effect on incomes is higher interest rates. The
higher interest rates mean farmers may put off purchasing more land.
Tim Johnson, an area vice president for Farmers National in eastern
Nebraska and western Iowa says, “Farmers aren’t quite as motivated
to go out and pay a premium for those farms.” Johnson also says,
“Buying farmland is a tricky gamble for farmers, however. While a
local dealer will have options for farm equipment, land isn’t always
for sale.”
With less income, some farmers
have to make cutbacks by only making necessary purchases. For
instance, with decreased income, farmers are not likely to buy new
tractors or combines.
A September 2024 report by Charlie Glass of the Glass Management
Group on the decline of tractor sales reviewed sales over the last
few years.
Glass says, “[T]he Under 40 HP category of tractors represented
62.2% of all tractors sold in 2023, which totaled 156,220 tractors,
was a significant market for the U.S. tractor manufacturers. This
class of tractors peaked in retail sales in April, 2021 with an
average twelve month rolling total of 219,547 units and the average
twelve month rolling total for August, 2024 was 139,289 units, or a
-36.6% decline.
There was also a decline in tractors with bigger horsepower. As
Glass says, “[t]he 40 to 100 horsepower tractor category data showed
U.S. sales peaked in November 2021 at a rolling 12 months average of
75,154 tractors. The August 2024 total for this category was 58,147
tractors, or a -22.6% decline in the number of units sold at retail
since the peak on November 2021.”
In the report Glass predicts that the trend of lower sales will
continue. The Glass Management Group has been tracking data on
tractor sales for 55 years and forecasting annual trends, so they
seem to have a clear understanding of the way the trends are going.
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Even with lower income, there
are helpful ways to deal with less money coming in. An October 8,
2024, FarmdocDaily article titled “Perspectives and Strategies for
Dealing with Low Farm Incomes in 2024 and Beyond” provides various
suggestions for managing with less income. This article suggests
reviewing farming practices to see where expenses could be cut.
Among the suggestions listed
in the article are reducing phosphorous, potassium and fungicide
applications.
Another idea is to “[r]educe overhead. Overhead costs include hired
labor, building repair and rent, building depreciation, insurance,
misc., and interest costs. Low cost producers often have
considerably lower overhead items than high-cost producers.”
Instead of purchasing new machinery, the article says, “[p]riority
should be given to those operations that have the potential to more
directly increase revenue, such as drainage projects, on-farm
storage, and farmland purchases.”
With the likelihood of decreased income continuing, it is important
to be prepared by developing strategies for dealing with challenges.
Making wise spending decisions and deciding what to prioritize
should help.
Resources:
Bauer, Will. “Farmers are making less money this year, which could
have larger economic consequences Harvest Public Media. 7 Oct. 2024.
https://www.nprillinois.org/
2024-10-07/farm-income-
down-ag-economy
Conterra Ag. “At a Crossroads: American Farmers Under Stress.”
Conterra Holdings LLC. 23 May 2024.
https://www.conterraag.com/
at-a-crossroads-american-
farmers-under-stress/#respond
Glass, Charlie. “Why the Decline in the Heart of Farm Tractor Sales
in 2024.” 14 Sept. 2024.
https://www.farm-equipment.
com/articles/22822-why-the-
decline-in-the-heart-of-farm-
tractor-sales-in-2024
Robinson, Lindsey. “Top Challenges for Modern Agriculture in 2024.
https://vlsci.com/blog/top-issues
-in-agriculture-2024/
Schnitkey, Gary et al. “Perspectives and Strategies for Dealing with
Low Farm Incomes in 2024 and Beyond.” Department of Agricultural and
Consumer Economics. 8 Oct. 2024.
https://farmdocdaily.illinois.edu/
2024/10/perspectives-and-strategies-
for-dealing-with-low-farm-incomes-
in-2014-and-beyond.html
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