The trend of lower net farm income farmers are seeing this year looks like it could continue into next season with projected lower grain prices and a commodity reset taking place similar to 2013. However, experts say the difference is farmers are facing more volatility and higher expenses.
After tight supplies and strong row crop prices for the 2022-23 marketing year, the markets may see a reset. Matt Erickson, ag economist with Farm Credit Services of America says even with drought in nearly half the corn belt, corn production is forecast to rebound. “On the domestic side where we’re expected to have plenty of corn this year. We look at what USDA put out in the August WASDE, 15.3% stocks to use ratio that’s above the 10-year average.”
And projected corn ending stocks at 2.2 billion bushels are above the 10-year average of 1.7 billion bushels. He says it will be hard to make a dent in that. “It would take yields to get down to about 169.7 bushels per acre to get down to that 10-year average.”
For soybeans, the U.S. balance sheet is tight, but South American competition may be a headwind. Erickson says, “Soybeans you know 5.8% stocks to use ratio that’s below the 10-year average, but we also have to look at the situation internationally. On soybeans we have plentiful soybeans if the 2023-24 crop is projected as estimated.”
Higher production costs also hit net farm income this year with record high inputs, which may continue.
Tony Jesina, vice president of insurance with Farm Credit Services of America, says, “Aside from fertilizer, all your other input costs are probably either stable or increasing. Cash rates haven’t come down yet seed prices rarely come down. Interest rates are up, family living expenses are probably not going to come down with what we see for inflation.”
And so, farmers balance sheets may look different from the past few years. He says, “Well for margins it obviously depends on the cost of production put its obviously going to narrow your margins.”
Both say the commodity reset is similar to 2013 in some ways, but there’s added volatility with black swan events making risk management more important.
