If you are a Corn Belt farmer, how will you be making enough money to survive a decade from now? That is a question for you and your family to ponder, based on profitability projections in the latest publication of the University of Missouri’s Food and Agricultural Policy Research Institute (FAPRI). FAPRI has calculated a significant squeeze on profitability for corn and soybean production over the next 10 years. And when you get to 2022, everyone in a farm family will need several part time jobs to put enough food on the table.
The FAPRI analysis and projection of the agricultural economy over the next 10 years was in a report provided to Congress, and many of the numbers parallel the recent 10 year projection of the Congressional Budget office. While there were detailed financial numbers provided, FAPRI also offered some generalizations:
- Higher corn prices almost offset sharply lower yields in 2012/13, leaving average Corn returns decline from 2011/12 peak per-acre corn market revenues only slightly lower than the 2011/12 record.
- Lower prices more than offset the projected yield increases, so market revenues decline in 2013/14 and 2014/15.
- Variable expenses (which exclude land costs) continue to increase.
- Projected farm program payments are very small relative to corn market receipts.
When FAPRI looked at corn, economists projected an initial surge in planted acres to nearly 97 million in 2013, with the acreage quickly tapering off in 2014 and remaining near the 91 million acre mark for the remainder of the 10 year period. With trend line yields rising to 180 bushels, production approaches the 15 billion bushel mark, with annual carryover of 1.5 to 2.0 billion bushels. Relationships between feed, ethanol, and exports generally stay in the same range, with exports returning to the 2.5 billion bushel range.
The kicker for the corn grower is the projected price fails to average over $5 per bushel. FAPRI calculates the farm price in the high $4 range through 2022. With the trend yield, that puts average gross revenue per acre in the $800 range for most of the period. Variable expenses slow rise from the current $350 per acre to over $400 per acre, with net returns generally in the $450 range. The question that corn growers will have to answer is whether land acquisition costs, whether rent or mortgage payments, can be covered by that level of margin and still have enough money for family living expense.