A final tally of the financial numbers for last year confirms a steep drop in farm income. In fact, many farmers across the state could show a loss as historically high input costs outweigh significantly lower crop prices.
“Farm income will be down considerably in 2015,” Gary Schnitkey, University of Illinois ag economist, said at the Illinois Farm Economics Summit. “Nonland costs plus cash rent exceeds gross revenue (on some farms).” Farm income this year could be between $20,000 and $30,000, down from about $104,000 in 2014. Incomes could be a little better or worse on some farms, depending on crop yields. And, it appears the trend could continue as crop prices could linger at current levels that are much lower than previous years. “2016 likely will be a repeat of 2015 (assuming another year of decent to good yields),” Schnitkey said. “We’re essentially back to 1998 to 2001 level incomes.”
The main drivers of the margin squeeze are lower commodity prices and high input costs. “Revenues have come down, but costs have not,” Schnitkey said. “We’re looking at less revenue, obviously.” Corn prices are expected to average near $3.65/bushel during the current year and near $3.85/bushel during the 2016-17 marketing year. For soybeans, the average will be near $8.90/ bushel both this year and the 2016-17 marketing year. The economist advises farmers to attempt to cut costs by as much as $100 per acre for the coming year to balance their budgets. Those who maintain or even bid up cash rents just to control or add acreage should budget it out to make sure they can absorb potential short-term losses in the hopes of long-term gains.
“Many farmers are in economically strong positions and could postpone cost-cutting decisions,” Schnitkey said. Those who attempt to cut costs, though, shouldn’t sacrifice yield potential, he noted.
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