Tuesday, November 20, 2012

2013 Net Farm Income Projections Above Average

AgFax.Com - Your Online Ag News Source


Current futures prices suggest harvest-time 2013 prices of $5.80 per bushel for corn and $12.40 per bushel for soybeans. Given these prices, 2013 farm incomes likely would be above average.

Worst case incomes depend on levels of projected prices used to set crop insurance guarantees. Likely projected prices will provide significant downside revenue protection.

To quantify income projections, farm incomes for a 1,200-acre Illinois grain farm are simulated and presented.




Farm Situation

Net farm income is simulated for the following farm designed to be representative of commercial grain farms in Illinois:

  • The farm has 1,200 acres.
  • Expected yields are 187 bushels per acre for corn and 54 bushels per acre for soybeans, with two-thirds of acres in corn and one-third in soybeans.
  • The farm owns 120 acres, share-rents 360 acres, and cash rents 720 acres. This represents the typical tenure/rental situation for farms in northern and central Illinois.
  • Cash rent is $300 per acre.
  • Farm costs are specified at levels contained in 2013 crop budgets.
  • The farm has $480,000 of debt.

Projected 2013 Net Farm Income

Current forward contract bids for 2013 harvest time delivery are $5.80 per bushel for corn and $12.40 for soybeans. Given these commodity prices, net farm income is projected at $291,000 (see Table 1). This income would be high relative to averages. Farms of this size have average income around $207,000 for the years from 2007 through 2011.
tab1.jpg
Slightly lower price projections of $5.40 for corn and $11.80 per bushel for soybeans would result in $229,000. Income projections at this level would still be above average.

Price over the next five to ten years likely will average considerably lower than the $5.80 corn price and $12.40 soybean price indicated by current futures prices. Estimates of average, or long-run, prices are $4.50 per bushel for corn and $10.50 per bushel for soybeans. These long-run prices result in $85,000 of net farm income (see Table 1).

Worst Case Net Farm Incomes

Net farm incomes could be considerably lower than projected above. To gain a feel for downside risks, worst case incomes are determined given the following:

  • Revenue Protection (RP) at the 80% coverage level is purchased for both corn and soybeans. Lower coverage levels would result in lower worst case incomes.
  • Trend Adjusted Actual Production History (TA-APH) yields are 180 bushels for corn and 50 bushels for soybeans.
  • Projected prices used to set crop insurance guarantee are set at $6.10 for corn and $12.70 for soybeans. These projected prices will be determined at the end of February and have a critical importance in limiting downside revenue. Lower projected prices will lower worst case net farm income scenarios.
  • Costs are assumed to remain constant and lower incomes result from lower revenues.

Given the above, the worst case income is $43,000. A number of price-yield combinations can results in this $43,000 income. Holding yields constant at 187 bushels per acre for corn and 54 bushels for soybean, the $43,000 worst case income would result with a $4.40 corn price and $9.10 soybean price.

Again, projected price used for crop insurance have a large impact on worst case incomes. Worst case incomes for lower projected prices are:

  • -$5,000 for projected prices of $5.70 for corn and $12.10 for soybeans, and
  • -$64,000 for projected prices of $5.20 for corn and $11.40 for soybeans.

Worst case income also depends on coverage level selected. For a $6.10 projected corn price and $12.70 projected soybean price, worst case incomes for different coverage levels are:

  • $92,000 for an 85% coverage level (both corn and soybeans),
  • $43,000 for an 80% coverage level,
  • -$5,000 for a 75% coverage level,
  • -$53,000 for a 70% coverage level, and
  • -$101,000 for a 65% coverage level.

Amount of land cash rented and cash rent level also impacts worst case incomes. Impacts of rental arrangements on projected incomes will be examined in a farmdocDaily post next week.

Summary

Current price projections at harvest time in 2013 place prices at $5.80 for corn and $12.40 for soybeans. These prices likely would result in above average 2013 net farm income.

These projected 2013 incomes also would be considerably above income projected using long-run prices. Overall, 2013 currently is projected as a good income year for crop farms. Worst case incomes will be influenced by projected prices and coverage level choices. Likely projected prices will provide significant downside risk protection given that relatively high crop insurance coverage levels are selected.


Tags: , , , , ,


Leave a Reply

Name and Email Address are required fields. Your email will not be published or shared with third parties.

Sunbelt Ag News

    DTN Grain Midday: Soybean Futures Climb 15 Higher10-23

    Ethanol Production Profits Hit the Wall — Why Did it Happen?10-23

    DTN Cotton Open: Slides Lower within Tight Ranges10-23

    U.S. Energy: Crude Exports, Re-Exports Continue to Rise10-23

    DTN Livestock Open: Buyer Support to Redevelop in Beef Futures10-23

    Gasoline Prices: Show 9-Cent Decrease10-23

    Propane Stocks: Increase by 0.2M Barrels10-23

    Diesel Prices: Average Drops 4 Cents10-23

    DTN Grain Open: Futures Start Quietly Higher10-23

    Keith Good: EPA’s Approval of Enlist Duo Herbicide Challenged by Suit10-23

    Grain TV: Volatile Day Ends Mostly Lower10-22

    DTN Livestock Close: Futures Move Back Higher10-22

    Alabama: Recent Weather Radar Oddity Was Mayfly Swarm10-22

    Doane Cotton Close: No New Fundamental News10-22

    Soybean Harvest: Prioritize Shatter-Prone Fields – DTN10-22

    Ethanol: Court Tosses E15 Labeling Lawsuit – DTN10-22

    AFB Grain-Soybean Close: Wheat Continues Higher, Slight Losses in Corn, Soybeans10-22

    AFB Cotton Close: Inside Day Turns Negative10-22

    AFB Rice Close: Futures Mostly Higher10-22

    Georgia: 2 Counties Declared Natural Disaster Areas10-22

    Arkansas: 2 Counties Designated Natural Disaster Areas10-22

    DTN Cotton Close: Mixed on Light Volume10-22

    DTN Grain Close: Wheat Higher, Corn, Soybeans Pull Back10-22

    AgFax Grain Review: More Lawsuits Against Syngenta; Harvest Well Behind Pace10-22

    DTN Livestock Midday: Hog Futures Lead Complex Higher10-22

    2 Families, 2 Approaches to Building Ranch Tourism — DTN10-22

    Don’t Just Piggy-Back on Others’ Prices in Ag Commodity Markets10-22

    National Cotton Council Commends Timely APH Announcement10-22

    Wheat Growers to Seek Inclusion in APH Yield Exclusion for 2015 – DTN10-21

    Farm Shop Dream Requires Thoughtful Planning – DTN10-21

    USDA: Weekly National Peanut Prices10-21

    USDA to Implement APH Yield Exclusion for 2015 Spring Crops10-21

    Arkansas: USA Rice Outlook Conference Set Dec. 7-9 in Little Rock10-21

    AgFax Cotton Review: Lower Acres May Close Mill; Australia Acres Up10-21

    DTN Fertilizer Trends: High Costs May Alter Growers’ Tactics for 201510-21

    Herbicide Resistant Weed Summit’s Slides, Webcast Available Online10-20

    Rice and Sugar: Thailand’s Quest for World Domination10-20

    AgFax Peanut Review: NM Down 6M Pounds as State Celebrates 100 Year Crop10-20

    Livestock: WTO Rules Against U.S. in COOL Dispute — DTN10-20

    Wheat Scientists, Breeders Advocate Biotech Crop — DTN10-20

    Good on Grain: Storage Issues May be Less Severe Than Anticipated10-20

    Brazil Soybeans: Planting Falls Further Behind — DTN10-20

    Flint on Crops: Cover Crops Provide Many Benefits10-20

    New Holland Combine Sets Guinness Harvest Record10-18

    Rice Market: Sideways Movement Continues10-17

    Rice Crop: Delta Region Saw Harvest Delays with Storms10-17

    Rose on Cotton: Dec Contract Still Under Pressure10-17

    Cleveland on Cotton: Exports Lowest in ‘My Memory’10-17

    Brazil: Beef Production Steps Up Over Next 10 Years10-17

    Soybeans: Neonic Seed Treatment Little or No Benefit, says EPA – DTN10-17

    Informa Forecast: Soybean Acres Up 4.3M in 2015 – DTN10-17

    DTN Grain Close: Prices Down for the Day, Positive for the Week10-17

    Crop Margins Tighten, Living Expenses Not Far Behind10-17

    USDA: Peanut Price Highlights10-17

    Georgia: 6 Counties Declared Natural Disaster Areas10-17

    Livestock: WTO Ruling on Country of Origin Labeling Expected Soon — DTN10-17

    U.S. Energy: Narrowing Brent-WTI Spread Impacts Global Crude Markets10-17

    Gasoline Prices: Show 9-Cent Decline10-17

    Propane Stocks: Rise by 0.7M Barrels10-17

    Sunbelt Ag Events

     

    About Us

    AgFax.Com covers agricultural trends and production topics, with an emphasis on news about cotton, rice, peanuts, corn, soybeans, wheat and tree crops, including almonds, pecans, walnuts and pistachios.

      

    This site also serves as the on-line presence of electronic crop and pest reports published by AgFax Media LLC (formerly Looking South Communications).

        

    Click here to subscribe to our free reports.

      

    We provide early warnings and confirmations about pests, diseases and other factors that influence yield. Our goal is to quickly provide farmers and crop advisors with information needed to make better and more profitable decisions.

         

    Our free weekly crop and pest advisories include:

    • AgFax Midsouth Cotton, covering cotton production and news in Alabama, Arkansas, Louisiana, Mississippi, Tennessee and Missouri.

    • AgFax Southeast Cotton, covering cotton production and news in Alabama, Florida, Georgia, North Carolina, South Carolina and Virginia.

    • AgFax Southwest Cotton (new for 2013!), covering cotton production and news in Texas, Oklahoma, Kansas and New Mexico.

    • AgFax West (formerly MiteFax: SJV Cotton), covering California cotton, alfalfa, tomatoes and other non-permanent crops in California's Central Valley.

    • AgFax Rice covering rice production and news in Arkansas, Louisiana, Mississippi, Missouri and Texas.

    • AgFax Peanuts, covering peanut production in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, North Carolina, South Carolina, Texas and Virginia.

    • AgFax Southern Grain: covering soybeans, corn, milo and small grains in Southern states.

    • AgFax Almonds, covering almonds, pistachios, walnuts and other tree crops in California's Central Valley.

    • AgCom 101, providing guidance to ag professionals involved in social media.

    Our newsletters are sponsored by the following companies: FMC Corporation Chemtura Dow AgroSciences.

          

    Mission statement:

    Make it as easy as possible for our community of readers to find and/or receive needed information.

              

    Contact Information:

    AgFax Media. LLC

    142 Westlake Drive Brandon, MS 39047

    601-992-9488 Office 601-992-3503 Fax

    Owen Taylor Debra L. Ferguson Laurie Courtney

          

    Circulation Questions?

    Contact Laurie Courtney