Prospects for grain farm incomes in 2014
Average grain farm incomes in 2014 likely will be much lower than 2013 incomes. Corn prices near $4.20 per bushel combined with above average yields could result in average incomes on grain farms in Illinois around $45,000 per farm, slightly below the average for the years from 1996 through 2005. A scenario that would result in average incomes near $134,000 per farm, the 2013 level of average income, would be above average yields combined with corn prices near $4.80 per bushel. This is a large range ($45,000 to $134,000), and it represents the likely range of average grain farm incomes over the next several years, with lower incomes possible if low commodity prices occur.
Net incomes for grain farms enrolled in Illinois Farm Business Farm Management averaged $51,000 per farm for the years from 1996 to 2005 (see Figure 1). During this period, the lowest year's average income of $18,000 per farm occurred in 1998, while the highest income of $94,000 per farm occurred in 2004.
Higher commodity prices since 2006 led to higher incomes. From 2006 through 2008, net farm incomes averaged $185,000 per farm. Because of lower corn and soybean prices, and much higher costs, incomes fell to $93,000 per farm in 2009. Higher commodity prices then caused higher incomes in 2010 through 2012, with average incomes in 2011 and 2012 exceeding $250,000 per farm.
From 2012 levels, incomes fell more than half to $134,000 per farm in 2013. Two factors caused the decrease between 2012 and 2013. First, grain prices declined. The corn price received for the 2012 crop averaged $6.93 per bushel, compared to $4.65 for the 2013 crop. Soybean price for the 2012 crop averaged $14.66 per bushel, compared to $13.25 for the 2013 crop. Second, crop insurance payments were lower in 2013 as compared to 2012 levels. The 2012 drought caused high crop insurance payments, with crop insurance payments accounting for about one-third of gross revenue in 2012. Crop insurance payments were much lower in 2013.
Prospects for 2014
While grain prices and yields are far from certain, most current projections of prices and yields result in much lower incomes for 2014. To illustrated, 2014 net incomes are projected under the following scenario:
- Costs are taken in 2014 budgets (see here). Non-land costs are projected slightly lower in 2014 as compared to 2013.
- Yields are projected at 10 bushels per acre higher for corn in 2014 than in 2013. Soybean yields for soybeans are projected 3 bushel per acre higher than 2013 yields. This yield scenario is for an above average yielding year, certainly within the prospects given weather up to this point. However, yields are far from certain. Hot, dry weather during the upcoming critical yield-determination weeks, or other adverse events, could result in much lower yields.
- Corn and soybean prices are projected at the midpoint of the WASDE range: $4.20 per bushel for corn and $10.75 per bushel for soybeans.
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