Corn and soybean growers will operate in “a much tighter margin environment” this year than in recent years because of lower market prices for the crops, said two University of Illinois agricultural economists on Tuesday. They cited fertilizer and land rents as potential areas for cost cutting.
Soybeans would generate larger returns than corn to farmers, by more than $100 an acre, in most parts of Illinois, “a fairly significant advantage,” wrote agricultural economists Nick Paulson and Gary Schnitkey at the farmdoc daily blog. But growers would lose money on rented land, according to updated crop budgets, “suggesting cost adjustments will be needed in 2024 and beyond.”
“While lower prices for fertilizer products, relative to the 2022 and 2023 crop years, provide some relief, lower corn prices in particular suggest that application rates should be revisited,” said Paulson and Schnitkey. Fertilizer is one fifth of the inputs, machinery, and overhead costs for corn.
“Land costs are another potential target to attempt to reduce production costs,” said the economists. Growers could suggest lower cash rental rates or a shift to variable cash leases.
In updated crop budgets, Paulson and Schnitkey estimated this year’s corn crop would sell for a season average of $4.50 a bushel and this year’s soybean crop would fetch an average of $11.50 a bushel, in line with cash bids, futures markets, and USDA projections. “These prices represent significant downward revisions” from the $4.80 for corn and $12.80 for soybeans in crop budgets drawn up in August, they said.
The USDA projects farmers will expand soybean plantings by 4 percent and reduce corn plantings by 3.6 percent this year. Corn and soybeans are the two most widely planted crops in the country. The 2023 corn crop was the largest ever, which would drive down market prices far into this year.
Net farm income, a gauge of profitability, was a record $182.8 billion in 2022 and $151.1 billion in 2023, the second-highest ever. A University of Missouri think tank says net farm income will decline modestly this year due to generally lower commodity prices. “However, farm income remains high by historical standards, even after correcting for inflation,” forecast the Food and Agricultural Policy Research Institute last fall. The USDA will make its first estimate of 2024 farm income next month.