Articles

    It’s been an unusual year

    Dr. Gary Schnitkey, agricultural and consumer’s economics professor at the University of Illinois Urbana-Champaign, opened the Chicago Farmers’ 2019 season to a large audience at the September 9th meeting with a discussion on 2019 farm income and cash rents and what the future holds.

    “It’s been one of the most unusual years that the Illinois Corn Belt has experienced,” said Dr. Schnitkey, referring to 2019. “The ‘prevent plant’ program and the trade situation dominated the year’s discussion. Northern Illinois, South Dakota and Ohio were the hardest hit by prevent plant.”

    He went on to say, “It is surprising how much corn actually did get planted and, in most cases, the corn looks good. However, it is late in development. In a normal season, we would be harvesting corn now, but it is more likely that the harvest will be in October and November. With the late development of the corn crop and the possibility of frost prior to harvest, we could be on a collision course.”

    Dr. Schnitkey pointed out that the trade situation with China worsened in May, but President Trump tweeted that MFP (Market Facilitation Program), which was offered in 2018, would continue in 2019. In Illinois, the MFP rates per acre for planted corn ranged from $53 to $87. He said that half of that payment has been received or will be soon by farmers. The remainder is not guaranteed. If the remaining funds do come, they could appear as late as January. “I think the payments will happen,” he said.

    Dr. Schnitkey noted the average MFP payment this year is $20 to $30 higher than last year. People involved in the prevent plant program, received $15 an acre. “The ad hoc Disaster Assistance Program has allocated $3 billion for MFP and targets prevent plant acres,” he added.

    The MFP was critical this year for farmers’ revenue, as were the ARC (Agricultural Risk Coverage) payments. Dr. Schnitkey advised farmers and landowners to postpone signing up for these programs now and consider doing so in November or December when it is clear which program will have the highest payout.

    Crop yields will be lower in 2019 for Illinois, he said. The USDA projected 180 bushels of corn per acre and 55 bushels of soybeans per acre.

    “We have had phenomenal yields since 2013,” said Dr. Schnitkey. “No one is predicting the same yields as last year.”

    He noted that the trade dispute with China hit the U.S. soybean market hard in May. Since then soybeans have been below $9 per bushel and could go as low as $7. The futures prices are at $8.80. Corn is continuing below $4 per bushel.

    “Corn prices could go higher through lower yields,” he said. “I don’t see how soybean prices could go above $9, even if the trade issue is resolved.”

     He related that the swine flu in Asia and Africa is reducing herds by 20 to 40 percent, which affects the need for soybean meal to feed the stock, and there is a large carry-over of soybeans. Dr. Schnitkey said that 2019 probably is not going to be a good year and 2020 looks like another scraping by year.

    Cash rents

    Dr. Schnitkey said that cash rents in Central Illinois ticked up slightly in 2019, but that is not projected for 2020.

    Land Productivity         2019 cash rent              2020 cash rent (expected)

    Excellent                      $302                            $298

    Good                           $261                            $254

    Average                       $212                            $205

    Fair                              $170                            $167

    He noted that the USDA would release the cash rent numbers for the state’s counties during the third week of September and the information would be posted on Farm Doc.

    In response to a question, Dr. Schnitkey said there is a growing percentage of variable cash rent arrangements. These are primarily used by professional farm managers. He said that variable cash rents are involved in about seven percent of land in Illinois. He said the trend is to move from share rent to cash rent. “The trend is a move to cash rent because farmers and landowners want simpler leasing arrangements,” he said.

    Dr. Schnitkey noted that most farms are still in strong financial positions.  He said, “I believe farmers are thinking there will be better prices in the future and they are going to hang on to their land. They believe that once they let go of their land, they will not get it back.”

    He said that it is projected that farmers’ debt to asset ratio will increase; working capital will decline. Additionally, the fall fertilizer prices are holding steading and not decreasing. This also is true for seed and pesticide costs.

    “Farmers will have to cut costs in the machinery area or in cash rents. However, if new machinery is not brought on, it could mean more money toward repairs,” Dr. Schnitkey remarked.

    In response to a question from the audience, Dr. Schnitkey said he did not see yields slowing too much because technology was in place to increase yields. “We know how to farm more acres,” he said.

    Regarding digital technology, he noted that it is being used by farmers in one form or another, but it’s what they do with it that makes the difference.  Dr. Schnitkey said, “I think there is a lot of data that are collected and people wonder how to use it.”

    He added that consumers have changing views on food. They are not only concerned about lower prices, but they want more amenities in their food. They care how food is produced. For example, they are focused on the production of more non-GMOs.

    “This will change Ag production, we will see more non-GMOs. But the consumers’ demands are fickle. Today it is non-GMOs, but what will it be in 10 years? It is a moving target,” said Dr. Schnitkey.

    Denise Faris, Chicago Farmers Editor