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Showing posts with the label Illinois

Tracking Black Cut Worm Moth Flights in Illinois | with Kelly Estes

Todd Gleason talks with Illinois Natural History Survey Entomologist Kelly Estes about insect pests of corn in the state.

2017 Projected Incomes on Illinois Grain Farms



Net incomes for Illinois grain farms are projected to be lower this year than last. If this University of Illinois estimate holds, writes agricultural economist Gary Schnitkey on the farmdocdaily website, the weakening financial position of farms in the state will worsen. The last half decade has really changed the financial picture for farmers says Schnitkey, “So we had high incomes from 2010 to 2012 and every year since 2012 we’ve been on a downward trend through 2015. This is when we hit a $500 per farm average net income on Illinois grain farms enrolled in FBFM. This is very low and the lowest through the entire period we’ve examined. Obviously this is not enough to maintain the financial position of farms.”

Schnitkey evaluated FBFM net income records going back to 1996. FBFM stands for Farm Business Farm Management and is a record keeping service for farmers. The service has not yet summarized net incomes for 2016. However it is projecting a substantial rebound.



It appears net income for grain farms in the service will average somewhere between forty and fifty-thousand dollars. There are three primary reasons for this says Schnitkey, “What lead to it was higher than trend line yields. USDA estimates the statewide corn yield at 197 bushels per acre. Just three bushels off the record yield set in 2014 of 200 bushels. Soybean yields averaged 59 bushels. It is a record setting yield. Both of those record setting yields lead to higher incomes in 2016 along with very good ARC County payments.”

Those are two of the three factors leading to a better 2016. The high yields and sizable ARC County payments - that’s the farm safety net from Washington D.C. - aren’t likely to be repeated this season. The third factor very well could be repeated. It is lower input costs including cash rents and fertilizer. It won’t be enough thinks Schnitkey.
Quote Summary - For 2017 we used trend yields and commodity prices of $3.80 for corn and $9.90 for soybeans that resulted in lower incomes for the year. Probably something in the $20,000 range per farm.
Schnitkey cautions it is very early in the season, and that at this same time last year 2016 was projected to be a very, very bad year. It rebounded. It is also important to note that while higher than 2015 incomes, the projected 2016 incomes do not result in the building of financial reserves on most Illinois farms. Schnitkey believes most farms will continue to see the erosion of working capital, potentially leading to the need to refinance outstanding operating loan balances.

UofI Alum Propst Elected IPPA President

A University of Illinois Animal Sciences alum has been elected president of the Illinois Pork Producers Association.

2016 Gross Farm Revenue & Income

It looks like this year is going to be better than last year for farmers in central Illinois. Todd Gleason explores how gross income has changed for row croppers in the middle of the prairie state.



The gross revenue for corn is $292 per acre. It is tallied from three income sources. The crop is worth $262. There was a $20 farm safety net payment from the ARC-County program and a $10 crop insurance indemnity. The total, again $292, is lower than last year says University of Illinois Agricultural Economist Gary Schnitkey, “Even though we are putting in a very high yield, we are using 231 bushels to the acre for the corn average - the same as in 2014, revenues will be down for corn in 2016 as compared to 2015”.



Schnitkey calculated the gross revenue figures for the farmdocdaily website.

The soybean figures add up in a similar fashion. The gross revenue is estimated to total $718 per acre. It’s a figure much higher than the 2015 gross says the agricultural economist, “We are including very high soybean yields for 2016. Record-breaking yields, in fact, of 73 bushels to the acre. The price is above $9.50, and this may actually turn out to be low as prices continue to climb. Overall, revenue on soybeans will be up from last year and much higher than total costs. So, our bright spot for the 2016 year will be revenue and income from soybeans”.



All in all, on the highly productive soils of central Illinois, 2016 will go down as a high-yield low-income year. Another year in which farmers just-get-by says Gary Schnitkey.
Quote Summary - Get-by year, but better than it could have been without the high yields. Most farmers will maintain equity, but may see some working capital declines. The declines will be more pronounced on farms working a higher percentage of cash rented land. It is better than 2015, but still not up to sustainable levels for the long-run. We need to see higher returns, particularly for corn prices in the future.
There are a series of graphics detailing 2016 central Illinois row crop farm gross income on the farmdocdaily website.

Soybean Yields in Illinois

via FarmDocDaily
by Gary Schnitkey, Agricultural Economist - University of Illinois

In recent years, soybean yields in Illinois have been exceptional, leading to questions on whether technologies have caused a "jump" in soybean yields. While the 2016 state yield will be an outlier, it is too early to say that a new regime of soybean yields exists. Relative to corn yields, soybean yields must increase more to have the same relative yields as in the early 1970s.

Comparing Soybean Yields to Trend

State soybean yields for Illinois have been exceptional from 2014 through 2016. In 2014, Illinois' soybean yield was 56 bushels per acre. The 2014 yield was a record high, 4.5 bushels per acre higher than the next highest yield of 51.5 set in 2010. The 2015 state yield again was 56 bushel per acre. In 2016, a new record will be set, with state yield estimated at 62 bushels per acre in the October Crop Production report produced by the National Agricultural Statistical Service. A 2016 yield of 62 bushels per acre would be 6 bushels per acre higher than the previous highest yield set in 2014 and 2015.

Comparisons to trend further illustrate how high recent yields have been in Illinois (see Figure 1). Fitting a linear trend through soybean yields results in an increase of .48 bushels per year. The 2014 through 2016 yields are significantly above the trend: 5.1 bushels in 2013, 4.6 bushels per acre in 2015, and 10.1 bushels per acre in 2016. The 2016 yield is a statistical outlier. Only one other yield has been 10 bushels away from the 1972-2016 trend, that being in the 1988 drought year when the actual yield was 11.5 bushels below trend



Why are Soybean Yields High?

Recent high soybean yields then lead to the question of what is causing the high yields. Have growing conditions been abnormally good in the past three years, leading to the high yields? Or has technology changed such that a higher yield should be expected in the future? Perhaps genetics have improved, or farmers' use of fungicides and other inputs have been leading to higher yields.

This question - is it good weather or technology changes - is difficult to answer from just observing time series of data. Two contradictory thoughts. Recent yields have been high, and the 2016 yield is a statistical outlier, suggesting technology changes. On the other hand, historical jumps in yields or trends have rarely occurred in the last 50 years. For example, corn yields appeared to be increasing at a faster after 1995 than before 1995. Belief in an increasing yield trend decreased after the poorer yields of 2010, 2011, and 2012. The recent high soybean yields in recent years may simply be a signal of exceptional growing conditions.

Soybeans Compared to Corn Trends

While soybeans have had exceptional yielding years recently, soybeans relatively to corn yields have not been at historically high levels. Figure 2 shows soybean yields divided by corn yields. Higher levels indicate that soybean yields are higher relative to corn. In 2016, soybeans divided by corn yield is .31, which is not above average.



Over time, soybeans-to-corn yields have been trending downwards. An expected level of soybean-to-corn yields in 1972 was .32. The .31 value in 2016 is below the expectation in 1972. The Illinois state yield for 2016 is projected at 202 bushels per acre. For a .32 soybean-to-corn yield ratio to result in 2016, soybean yield would have to be 64.6 bushels, 2.6 bushels higher than currently projected.

Soybean yields have been declining relative to corn yields because of higher trends for corn. In Illinois, corn yields have been increasing by 1.8 bushels per year compared to .48 bushels per year for soybeans. Over time, the higher increase in corn yields causes lower soybean-to-corn yields

Summary

Soybean yields in Illinois have been exceptional in recent years, with yields being much higher than trend yields. It is too early to say that a permanent change has occurred, and history suggests permanent changes occur rarely.

Grain Farm Working Capital Nearly Exhausted

Four consecutive years of lower commodity prices has nearly exhausted the financial resources of U.S. grain farmers. Todd Gleason looks into the problem with an agricultural economist from the University of Illinois.

2016 County Cash Rents | an interview with Gary Schnitkey

The National Agricultural Statistical Service (NASS) - an agency of the U.S. Department of Agriculture - released average county cash rents for 2016 the second week of September. These county rents are used to imply average rents for different expected corn yields in the state of Illinois.

Grain Farm Income & Cash Rent Outlook

by Todd E. Gleason



Urbana, Illinois - Wednesday morning September 7, 2016 University of Illinois Extension Agricultural Economist Gary Schnitkey presented a webinar looking forward into 2017. The discussion centered on farm profitability, projected income, and cash rents. You may the watch the webinar. What follows is a summary of the hour long content.





The USDA WASDE monthly average corn price is $4.67 from 2006 to 2016. The price of corn has been below this average since the fall of 2013 & Gary Schnitkey believes it is likely to continue to stay below this average through the 2017/18 crop year.

Each year USDA tracks the average marketing year cash price. This price is updated monthly in the World Agricultural Supply and Demand Estimates report. The average cash price for corn from 1975 to 2005 is $2.33, $5.95 for soybeans. This is a long term national average cash price. The USDA projected estimates for this marketing year (2016/17) are currently $3.15 and $9.10. The USDA estimate for the 2015 crops is $3.60 and $9.05. This last set can be used to compute expected ARC County payments to be delivered this fall.







Here is a [link](http://farmdoc.illinois.edu/fasttools/index.asp) to the FarmDoc Fast Tools web page from which you may download an Excel spreadsheet to project ARC & PLC payments.

The following tables detail gross revenue per acre for highly productive central Illinois farmland. These are actual, as derived from the Illinois Farm Business Farm Management records, and projected revenues.







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Operator and land returns have been declining for both corn and soybeans for several years. However, returns from soybeans have been out performing corn since 2013. Schnitkey predicts this will continue through 2017. It would be the fifth year of higher returns for soybeans than corn. Raising corn on cash rented farmland has been a loser since 2014.

Total income on all Illinois corn and soybean farm (all types of owned & cash rented combined) for 2016 projects a breakeven income year.




Schnitkey says farmers will face three key decision making factors as they consider cash renting farmland for 2017, and that it might be better to give up some of the land based on these considerations.




Across the board the University of Illinois agricultural economist says farmers might need to rethink crop rotations. Soybeans have proved better for several years, and it may be time to adjust to this reality. This or it needs to get cheaper to plant corn. Back in 2000 it costs $63 less to sow and harvest an acre of soybeans. This year the difference was more than $200 an acre of non-land costs in favor of soybeans over corn.



Last week the professional farm managers in Illinois suggested they'd be lowering cash rents by about $20 next year (ISPFMRA Survey). Gary Schnitkey's number is a more conservative $17 an acre based on the fact not all land is professionally managed. Neither of these would be enough to make a cash rented farm break even given $3.50 corn and $9.00 soybeans (2017 | by expected corn yield across Illinois).



So what's the impact on the price of farmland? Well, says Schnitkey, if interest rates stay low the price of farmland will drop by approximately the same percentage change as the cash rent drops. Because cash rent changes very slowly, this is good news for farmland owners, bankers, and producer owners.





Each Tuesday Gary Schnitkey posts a new article to the FarmDocDaily website. Periodically he and the other agricultural economist at the University of Illinois hosts webinars. You may register for upcoming webinars and watch those that have already concluded on this page.


Low Returns, Crop Prices Keeping Pressure on Farmland Values



(Boone, IA, August 31, 2016) – Illinois farmland values continued their pullback around the state during the first half of 2016 as prices retraced between an estimated 3.3 percent and 7 percent. Continued low net returns and softening commodity prices are cited as the primary cause of the decrease. This is according to the Mid-Year “Snapshot Survey” information gathered by the Illinois Society of Professional Farm Managers and Rural Appraisers as well as the Illinois Farm and Land Chapter of the REALTORS® Land Institute (RLI). The data analysis is provided by Gary Schnitkey, Ph.D., with the University of Illinois College of ACES. The survey is part of an ongoing and larger annual Land Values and Lease Trends project conducted by the Society.

The survey results were released today at the Farm Progress Show being held in Boone, IA.

According to the survey, below $4 per bushel prices paid for corn are expected to continue into 2017 with some decreases in production costs expected. Cash rents paid are also expected to drop about $20 per acre.

Farmland Values and Volumes
Survey respondents indicated that land values decreased 3.3 percent for Excellent-quality farmland; decreased 4.5 percent for Good-quality land; 5.6 percent of Average-quality land; and dropped 7.0 percent for Fair- quality land.

(In a normal year, Excellent- quality farmland averages over 190 bushels of corn per acre, Good- quality farmland averages between 170 and 190 bushels per acre, Average- quality farmland averages between 150 and 170 bushels per acre, and Fair- quality farmland averages below 150 bushels per acre. )

Respondents estimated prices paid for Excellent-quality farmland during the first half of 2016 averaged $11,100 per acre; $9,400 for Good land; $7,600 for Average-quality land; and $5,800 for Fair-quality farmland. Sixty three percent of those responding to the survey reported that less farmland was sold during the year and 85 percent expect the same amount of land, or less, to be available for sale in 2017. Typical buyers (64 percent) continue to be other farmers and there are no expectations of significant changes in this.

Respondents indicate they are split on whether there will be the same or more demand for land with 48 percent expecting there will be some decreases in demand and 51 percent anticipating no change or a very slight increase.

Price Expectations
Overall, respondents are more pessimistic about prices at midyear this year compared to recent surveys with a full 90 percent expecting some further decreases in values ranging from 1 percent to 10 percent. Corresponding decreases on per-acre-return are also forecast with 49 percent expecting a drop between $25 and $50 per acre and 16 percent predicting decreases of more than $50 per acre. A mere 2 percent expect returns to increase and then only very modestly.

Cash Rents
While a full 93 percent expect corn yields to be above average they expect the price for corn to be around $3.45 per bushel. A full two-thirds of respondents expect a ‘slight’ decrease in production costs. All of this leads to expectations that cash rents will continue their decline along the lines of land productivity.

Expected rents for 2017 for Excellent- and Good-quality land are expected to decrease by 7 percent; 9 percent for Average land; and 6 percent for Fair farmland.





Currently the most popular type of lease arrangement is for Cash Rent (32 percent) followed by Share Rent (29 percent), Variable Cash Rent (20 percent), Modified Share Rent (12 percent) and Custom Farming (7 percent). Respondents indicate Share Rent leases and Fixed Cash Rents will decrease in use while Variable Cash Rents will become more popular.

The ISPFMRA will be conducting its annual Land Values and Lease Trends Survey over the upcoming winter months. The results of this larger survey will be released at the 2017 Illinois Land Values Conference set for March 23, 2017 at the DoubleTree by Hilton in Bloomington, IL.

Governor Rauner Announces Illinois State Fair Foundation

The Illinois State Fair has a new funding source. Governor Bruce Rauner has announced the creation of the Illinois State Fair Foundation. He says it is a non-governmental, non-political, privately run 501c3 Not-for-Profit to be operated by farmers and community leaders.

The private foundation was created after the Illinois State government failed to pass legislation last year to create a similar board. The private foundation will work to restore and maintain the Illinois State Fair in Springfield, and the DuQuoin State Fair in the southern part of the state.

4-H Robotics Competition @ ILLINOIS

Did you know 4-H, that’s the world’s largest youth organization, is into robots. It is, and so are kids. Todd Gleason has more from an amazing robotics competition held in mid-April on the University of Illinois campus in Champaign, Illinois.

Are Soybeans-After-Soybeans Profitable | with Gary Schnitkey

Low commodity prices have farmers around the nation considering a different crop rotation. Some have been wondering if it might be more profitable to plant soybeans after soybeans this year. University of Illinois Extension Economist Gary Schnitkey addressed the issue on the FarmDocDaily website and told Todd Gleason farmers in northern and southern Illinois might consider the option.

Touring the IL Speciality Crops Trade Show

Todd Gleason tours the Illinois Speciality Crops, AgroTourism Conference trade show floor to demonstrate diversity within the industry.

Food & Agriculture Road Map for Illinois

Up next, a plan to make Illinois and the Chicago region into a leading global hub for food and agriculture innovation. We’ll learn about FARM Illinois from Todd Gleason.

U of I Extension Food Safety Training for School Lunch Program

The Illinois State Board of Education has awarded four and half million dollars to University of Illinois Extension. The money will be used to help with the state’s school lunch program. The Board will use Extension to provide foodservice training and education to about 4000 school lunchrooms. Family & Consumer Sciences educators will create and deliver training on child nutrition standards and the cafeteria environment. The $4.5 million, three year effort starts in January with a monthly webinar series. A web training portal will follow in March. Schools interested in training can also contact Extension for onsite customized sessions and technical assistance says University of Illinois’ Jennifer McCaffrey.

Don't Bet the Cash Rented Farm on a Loss

It is very difficult to give up a farm, even one that is losing money because the cash rent is too high. Todd Gleason has a few simple guidelines one might follow to help them make that decision.

Working Capital on the Farm

Low commodity prices are quickly eating into the reserves farmers built up over the last several years. Todd Gleason has more on agriculture’s ‘working capital’.

Decreasing 2016 Cash Rents on Professionally Managed Farmland

Cash rents on professionally-managed farmland are set to decrease next year. That’s the conclusion of a survey in the state of Illinois.

Original Survey
Schnitkey Article

2016 Cash Rents May Need to Drop $100

Farm income this year is going to be dramatically lower than in the past. Next year doesn’t look any better even on highly productive central Illinois soils. Todd Gleason reports farmers must cut costs to survive, and that cash rents may need to come down by as much as one-hundred-dollars per acre.

Projected 2015 Net Incomes on Grain Farms

by Gary Schnitkey, Extension Agricultural Economist - University of Illinois

Average 2015 net income for grain farms in Illinois is projected at around $15,000 per farm, down considerably from the 2014 average of slightly above $100,000 per farm (see Figure 1). Furthermore, the 2015 net income will be below incomes in 2010 through 2012 which were above $200,000 per farm. This decline in incomes raises questions.

title

What do incomes in Figure 1 represent?

Historical values in Figure 1 are average net farm incomes of grain farms enrolled in Illinois Farm Business Farm Management (FBFM). These farms are located throughout Illinois and represent a variety of farm sizes, tenure relationships, and debt positions. Farms have increased in size over time. In 2014, average farm size was close to 1,500 acres, but the sample included many smaller farms and may larger farms. There were a relatively large number of farms of over 5,000 acres.

How was the 2015 net farm income projected?

Commodity prices, yields, input costs, and cash rents were projected for 2015. More detail on these projections are contained in the 2015 budgets which are summarized in the July 7th FarmDoc daily article. Key items impacting projections are:
  • Commodity prices are $4.20 per bushel for corn and $10.00 per bushel for soybeans.
  • Yields are presumed to be near trend line levels.
  • Non-land costs are projected to declines slightly from 2014 levels.
  • Cash rents are projected to decrease slightly from 2014 levels.
Can 2015 net incomes vary from projections?

Of course. Differences in prices and yields from those used in projections will change incomes. For example, corn price could easily be $.50 per bushel different from the $4.20 price used in projections. With higher prices or higher yields, 2015 net incomes could be above $50,000. However, it is difficult to build a case where 2015 incomes are not considerably lower than 2014 incomes.

Why are 2015 net incomes projected so much lower than 2014 net incomes?

The projected 2015 commodity prices ($4.20 for corn and $10.05 for soybean) are above commodity prices received for 2014 crop (likely $3.70 for corn and $9.75 for soybeans). Given higher prices, why then are projected 2015 incomes lower than 2014 net incomes? Two reasons:
  • Trend line yields are used in 2015 projections. Much of Illinois had above average yields in 2014, contributing to higher net incomes.
  • Marketing gains contributed a large amount to 2014 incomes. Grain produced in 2013 was valued at a lower price on the end-of-year 2013 income than it was sold in 2014. More detail is provided in the May 27th FarmDoc daily article.
Why is projected 2015 net income lower than averages between 2000 through 2005?

From 2000 to 2005, net incomes on Illinois grain farms averaged $57,500, higher than incomes projected in 2015. When making 2015 projections, a $4.20 corn price and $10.00 soybean price are used. These 2015 projected prices are significantly above prices from 2000 to 2005 when prices received by Illinois farmers averaged $2.18 for corn and $5.69 for soybeans. Given higher prices, revenue is projected higher in 2015 than from 2000–2015. However, costs are projected much higher as well. For example, non-land costs for corn have increased 224% from $256 per acre average from 2000–05 to $578 per acre in 2015. Cash rents have increased 205% from $139 per acre to a projected $286 per acre. These cost increases are the primary factor offsetting higher commodity prices, leading to lower projected incomes in 2015.

Will lower incomes signal financial stress?

These lower incomes suggest the need for continuing financial adjustments. More on the financial strength and need for adjustments will be covered in the July 28th FarmDocDaily article.