Tuesday, June 24, 2014
100-dollar-bill-08042011-feature

Illinois: Farm Income Prospects Lower Than Recent Years

AgFax.Com - Your Online Ag News Source


Average grain farm incomes in 2014 likely will be much lower than 2013 incomes.  Corn prices near $4.20 per bushel combined with above average yields could result in average incomes on grain farms in Illinois around $45,000 per farm, slightly below the average for the years from 1996 through 2005.  A scenario that would result in average incomes near $134,000 per farm, the 2013 level of average income, would be above average yields combined with corn prices near $4.80 per bushel.

This is a large range ($45,000 to $134,000), and it represents the likely range of average grain farm incomes over the next several years, with lower incomes possible if low commodity prices occur.

 

Historical Grain Farm Incomes in Illinois

Net incomes for grain farms enrolled in Illinois Farm Business Farm Management averaged $51,000 per farm for the years from 1996 to 2005 (see Figure 1).  During this period, the lowest year’s average income of $18,000 per farm occurred in 1998, while the highest income of $94,000 per farm occurred in 2004.

figure1.jpg

Click Image to Enlarge

Higher commodity prices since 2006 led to higher incomes.  From 2006 through 2008, net farm incomes averaged $185,000 per farm.  Because of lower corn and soybean prices, and much higher costs, incomes fell to $93,000 per farm in 2009.  Higher commodity prices then caused higher incomes in 2010 through 2012, with average incomes in 2011 and 2012 exceeding $250,000 per farm.

From 2012 levels, incomes fell more than half to $134,000 per farm in 2013.  Two factors caused the decrease between 2012 and 2013.

First, grain prices declined. The corn price received for the 2012 crop averaged $6.93 per bushel, compared to $4.65 for the 2013 crop.  Soybean price for the 2012 crop averaged $14.66 per bushel, compared to $13.25 for the 2013 crop.

Second, crop insurance payments were lower in 2013 as compared to 2012 levels.  The 2012 drought caused high crop insurance payments, with crop insurance payments accounting for about one-third of gross revenue in 2012.  Crop insurance payments were much lower in 2013.

Prospects for 2014

While grain prices and yields are far from certain, most current projections of prices and yields result in much lower incomes for 2014.  To illustrated, 2014 net incomes are projected under the following scenario:

  1. Costs are taken in 2014 budgets.  Non-land costs are projected slightly lower in 2014 as compared to 2013.
  2. Yields are projected at 10 bushels per acre higher for corn in 2014 than in 2013.  Soybean yields for soybeans are projected 3 bushel per acre higher than 2013 yields.  This yield scenario is for an above average yielding year, certainly within the prospects given weather up to this point.  However, yields are far from certain.  Hot, dry weather during the upcoming critical yield-determination weeks, or other adverse events, could result in much lower yields.
  3. Corn and soybean prices are projected at the midpoint of the WASDE range: $4.20 per bushel for corn and $10.75 per bushel for soybeans.

The scenario is based is for 2014 to be an above average year, with higher yields leading to more supply and lower grain prices.

Given this scenario, average net income are projected at $45,000 per farm, considerably below any average income level since 2006.  This income would be closer to incomes from 1995 to 2005, the period before the commodity price increase, with the $45,000 projected average being lower than the 1995 – 2005 average of $51,000 per farm.

Two factors lead to the lower income projections for 2014.  First, grain prices are projected lower.  The $4.20 corn price projected for 2014 is below the $4.65 price for the 2013 crop.  Similarly the $10.75 soybean price projected for 2014 is below the $13.25 price for the 2013 crop.

Second, crop insurance payments are projected lower in 2014.  In 2013, the average insurance payment for corn insured in Illinois was $54 per acre (see Summary of Business at the Risk Management Agency).  The majority of these payments resulted because the 2013 harvest price of $4.39 was 22% below the 2013 projected price of $5.65.

In 2014, the projected price for corn is $4.62 per bushel.  A 22% price decline – similar to the 2013 decline – would result in a $3.59 harvest price.  At that price level, gross revenue would be much lower than those used to generate the $45,000 net income projection. Higher crop insurance payments would not offset gross revenue losses, leading to a much lower income projection than $45,000.

Variation in Income Projections

Differences in yields and prices will impact revenue projections.  To illustrate, average net income is projected with a higher and lower set of prices. Yields ware held constant at the above average levels.

For higher prices, income projections are given for a $4.65 corn price and an $11.25 soybean price, levels slightly above expected long-run averages.  Continued strong demand for grains could result in these price levels.  At these price levels, average net income is projected at $108,000.  A change in price from $4.20 to $4.65 for corn, an increase of $.45 per bushel, has a large impact on incomes.

For lower prices, a $3.75 corn price and a $10.25 soybean prices are used in income projections.  This scenario results in -$7,000 of average net income.  This scenario assumes that farmers enroll in the ARC commodity program and that ARC makes $40 of payments per corn base acre.  The other farm program alternative, Price Loss Coverage, would not make payments at these projected prices.

Prices Required for 2013 Income Levels

Given above average yields, 2014 incomes would reach the 2013 level of $135,000 average per farm if corn price was $4.80 per bushel and soybean prices was $11.50 per bushel.  Given average yields, 2014 incomes reach the 2013 level at a corn price of $5.05 per bushel and a soybean price of $12.00 per bushel.

Summary

Incomes in 2014 likely will be considerably below those in recent years.  Corn prices in the low $4.00 range likely will result in incomes below $50,000.  Corn prices in the high $4.00 range will result in average incomes above $100,000.  If corn prices average around $4.50 over the next several years, average incomes likely will be in the above range for the next several years.  Lower incomes are possible with corn prices below $4.00 per bushel.

Gary Schnitkey

farmdocDaily

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

    Midwest Corn And Soybean Yields – Our Readers’ Reports – AgFax11-22

    Rice Comment: The Case for Neonicotinoid Seed Treatment11-22

    U.S. Rice: Rain Stalls Texas 2nd Crop Harvest; Crop Sales Continue11-22

    Rice Market: Sale to Iraq Moves the Market11-22

    Rose on Cotton: Looking for the Positives This Week11-21

    Grain Drying: 6 Questions About Effects Of Sudden Drop In Temps11-21

    Is Your Lifestyle Costing You the Farm?11-21

    DTN Livestock Close: Cattle Futures Solidly Higher11-21

    Farmers Storing Grain Need to Weigh Risk Management Factors – DTN11-21

    Peanut Harvest Updates From Southeast, Delta And Southwest – AgFax11-21

    Cleveland on Cotton: 57 Cents – ‘The Bottom is In’11-21

    Ag Labor: Immigration Order Provides Little Long-Term Benefit – DTN11-21

    Doane Cotton Close: Decline in Chinese Production Offers Support11-21

    AFB Grain-Soybean Close: Strong Soybean Gains, Little Movement in Corn, Wheat11-21

    Southern Soybean, Corn Harvest Reports, Round One – AgFax11-21

    AFB Cotton Close: Futures Rebound11-21

    AFB Rice Close: Prices See More Slight Gains11-21

    DTN Cotton Close: Settles Higher on Light Volume11-21

    DTN Grain Close: Soybeans Boosted by Demand11-21

    USDA: Peanut Price Highlights11-21

    Oklahoma Pecans: Deliveries Remain Light11-21

    Georgia Pecans: Buying Interest Very Active11-21

    Ag Policy: Farm Bills Need Long-Term View11-21

    Cotton Market Weekly Review by Region11-21

    DTN Livestock Midday: Cattle Futures Surge Higher11-21

    Arkansas Cattle: Ranchers Should be Alert to Acorn Poisoning11-21

    DTN Grain Midday: All 3 Commodities Go Higher11-21

    Economist: Livestock Industry Will Have Strong Rebound11-21

    DTN Dried Distillers Grain: Cheaper Feed Source for Beef Producers?11-21

    Mississippi Outdoors: Common Deer Parasites Do Not Affect Venison11-21

    DTN Cotton Open: Trades Higher after No Notices Issued11-21

    AgFax Wildlife Review: New E-Book Offers Tips for Gardening in South11-21

    DTN Livestock Open: Cattle Futures to Start Mixed11-21

    Weather Challenges Florida and Iowa Farms — DTN11-21

    Vilsack: Immigration Order Creates ‘Stability’ in Ag Work Force — DTN11-21

    DTN Grain Open: Lower Start Across Board11-21

    Keith Good: What’s Next for Meat Labeling?; Sugar Prices Take Tumble11-21

    Texas Cotton Harvest – Still Some To Go – AgFax11-20

    Mississippi: Water Conservation Summit, Stoneville, Dec. 1011-20

    Farm Internet Service Still Slow or Non-Existent, But Improving – DTN11-20

    Yield: Important Factor in Your Irrevocable Farm Program Choice11-20

    U.S. Grain Transportation: Weekly Inspections Reach Record11-20

    U.S. Drought Outlook: Improvements Expected for California, Southwest11-20

    U.S. Energy: Planned Refinery Maintenance Light in 201411-20

    Propane Stocks: Post Slight Increase11-20

    Gasoline Prices: Decrease by 5 Cents11-20

    Diesel Prices: Average Drops 2 Cents11-20

    Livestock: Arctic Chill Catches Markets Flatfooted – DTN11-19

    Farm Runoff Targeted for Regulation Following Algal Bloom Shutdown – DTN11-19

    Soybeans: China May Import More Non-GMO Beans – DTN11-19

    Mississippi Outdoors: Free Apps Can Aid Deer Hunters11-19

    Big River Rice And Grain Enhances, Expands Facilities In Arkansas, Louisiana11-19

    Farm Bill Commodity Program: Decisions and More Decisions11-18

    Young Farmers: USDA is the ‘Lender of 1st Opportunity’ – DTN11-18

    Tax Extenders: Farm Groups Push Congress to Renew Section 179 This Year – DTN11-18

    USDA: Weekly National Peanut Prices11-18

    DTN Fertilizer Trends: Prices Show Little Movement11-18

    North Carolina: Bt Resistant Armyworms Migrating North11-18

    Georgia Cotton Commission Meeting, Production Workshop, Tifton, Jan. 2811-18

    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