Agriculture continues to be shining star for U.S. economy
It’s still early, but 2013 has the hallmarks of another bright year for corn and soybean farm profits—just not one for the record books, such as 2012.
The University of Illinois (U of I) projects a net income of $291,000 using $5.80 corn prices and $12.40 soybean prices for a 1,200-acre corn/soybean farm. "Overall, 2013 is projected as a good income year for crop farms," says Gary Schnitkey, U of I ag economist.
This year’s projected income level is significantly above long-range projections of $4.50 corn and $10.50 soybeans that would result in more modest net farm income of $85,000. Farms of the size in Schnitkey’s simulated model had average income of $207,000 for the years 2007–11.
Variables include 187 bu. per acre for corn yield and 54 bu. per acre for soybean yield, a split between owned and rented farmland and $480,000 in debt.
"Profits for 2013 will back off a little and look a lot like 2011," adds Chad Hart, Iowa State University ag economist. On the expense side, Hart is forecasting a 5% to 7% increase. Total costs are likely to be in the $4.70 to $4.80 per bushel range for corn and $11.30 to $11.40 for soybeans.
That said, Hart believes price protection is in order. "I can tell a good story on why corn prices next fall should be either $4 or $9. While both corn and soybean prices are likely to be highly volatile, expect soybean prices to be the more volatile of the two," Hart explains.
For southern Minnesota, a University of Minnesota model projects net farm income for corn of $240 per acre, using early December futures prices. Few years compare with that historically, although it is far shy of the $473 return for 2012. "Last year was a phenomenal year," says Bob Craven, a University of Minnesota ag economist.
Factoring in a $55 per acre return to management and labor, breakeven for corn is $4.94 per bushel with a cash rent of $231 per acre. Break-even for soybeans is $5.91 per bushel with a cash rent of $400. Corn profits are projected to be about double those of soybeans.