A period of weak net farm income that began four years ago may come to an end in the next year or two, but farmers still need to continue to do business as usual.
Ag economist Chris Hurt made that recommendation during the 16th annual Farmers Breakfast on Wednesday at Pewter Hall in Brownstown.
“We might be getting to the point where we may be seeing some positives,” said Hurt, a professor in the Department of Agricultural Economics at Purdue University.
Hurt said a period of moderate farm income began with the crop of 2014 and has continued through this past year. The average annual net farm income during that period was $1.775 billion.
That followed a boom period that ended in 2003 when net farm income was $5.5 billion.
After a boom period, it takes about six years to adjust, Hurt said.
But during downtimes, farmers tend to watch costs, including the price of inputs and usage rates on those inputs, he said.
“We’re trying to think about things like genetics,” he said. “… and how many traits I might need in my seed.”
They’re also watching cash flows and capital purchases and machines, he said.
“And we are really watching our family expanse and doing the same things previous farm families have done,” Hurt said. “The bottom line is all those things are good to do anyway.”
There are some signs of hope that farm income may rise, he said.
One of the first signs is the recent tax reforms passed by Congress.
“It’s going to be beneficial for most farm families,” Hurt said of the Tax Cuts and Jobs Act.
He said most taxpayers but sure not all are going to see some benefits.
Those benefits are going to get spent by the people with low to moderate incomes, Hurt said.
Another bright spot is general commodity prices.
“Corn futures generally move in the same direction of the other commodities,” he said.
Crude oil has more than doubled in the past two years, and copper prices have increased about 60 percent, Hurt said.
Corn is 15 percent higher, he said.
The issue at this time is there is too much corn inventory in the United States and the world, he said.
“There won’t be any dramatic increases until inventory goes down,” Hurt said.
Lower prices will push usage, he said.
That could include higher exports. Drought conditions in South America and the central United States right now also could help reduce inventories and push up prices, Hurt said.
“There are some early signs of positives,” he said. “I have a sense we are through the worst. We still have some pretty big inventories to work through.”
Those are based on record yields three of the past four years, Hurt said.
“We have quite a lot to sell, and that will help with the cash flow,” he said.
This past year, the average acre of corn in south central Indiana produced a yield of 178 bushels.
Future prices for this year show corn at $3.85 a bushel, soybeans at $9.85 and wheat at $4.55. In 2019, future prices show corn at $4 a bushel, soybeans at $9.79 and wheat at $5.20.
The costs of production have been moderating for the past few years with tight crop margins, and costs will be stable this year, he said.
The event is organized by the Community Foundation of Jackson County with the support by local agribusinesses.