Higher inputs and lower prices for corn and soybeans will likely strain farm profitability in 2009, according to Univ. of Illinois economist Gary Schnitkey. “It’s likely that the high returns period experienced during 2007 and 2008 is over and crop farming now faces agricultural returns closer to historical averages,” he says.
He projects net farm operator returns for 2009 at minus $8 per acre for corn and minus $15 per acre for soybeans, the first negative returns for the decades of the 1990s and 2000.
At the same time, Schnitkey expects net operator returns for 2010 will rise from 2009 levels to $94 per acre for corn and $84 per acre for soybeans. “The higher 2010 returns are based on lower non-land costs. Non-land costs for corn are projected at $440 per acre in 2010, down by $77 per acre from 2009 non-land costs of $517 per acre.
“Lower 2009 returns are caused by higher input costs and declining commodity prices. In 2009, non-land costs for corn are projected at $517 per acre, $89 higher than the 2008 non-land costs of $428 per acre. On the commodity price side, farmers received an average of $4.05 per bushel for corn in 2008. It’s expected that they will receive $3.25 per bushel for corn in 2009,” says Schnitkey.
“Fertilizer prices used for 2010 projections are $400 per ton for anhydrous ammonia, $400 per ton for DAP and $600 per ton for potash. By way of comparison, anhydrous ammonia prices were above $1,000 per ton during the summer of 2008,” Schnitkey said.
Budgets for 2010 contain an estimate of $3.75 corn and $10 soybeans. In late September, these prices were above bids available on futures markets.
Based on estimates released by the National Agricultural Statistical Service, 2009 Illinois yields are projected at 200 bushels per acre for corn and 51 bushels for soybeans. These estimates are slightly above 2008 yields of 199 bushels for corn and 50 bushels for soybeans. The 200 bushels expected 2009 yields is above the 5-year average yield of 188 bushels per acre. The 51 bushels expected 2009 yield for soybeans is below the 5-year average of 54 bushels per acre.
Farm Business Farm Management System records show that cash rent in central Illinois averaged $197 per acre in ‘08 for high-productivity farmland. It is projected at $210 in ‘09.
“These 2009 returns indicate that farms will likely face financial stress. However, returns in 2007 and 2008 were above average and many farmers built financial reserves that will carry them through the low income year of 2009. I don’t expect widespread financial difficulties across grain farms in the Corn Belt,” says Schnitkey.