USDA boosts farm income, production cost estimates

USDA’s latest estimates of farm income and input cost estimates have a similar vibe of 2012-14, which can be exciting and a little scary at the same time.

On the bright side, the Ag Department projects net farm income could increase $18.5 billion this year compared to 2020, due in large part to higher commodity prices.

If realized, 2021 net farm income could reach $113 billion, which would be the highest level since 2013.

However, USDA projects input costs could climb $26.1 billion this year to $383.5 billion as spending in all categories is expected to rise. At that level, production costs for 2021 would be the highest since 2016, but below the 2014 peak in inflation-adjusted terms.

“We’re going to have good incomes this year in Illinois in most places,” Gary Schnitkey, University of Illinois professor of farm management and Soybean Industry Chair in Ag Strategy, said at the Land Pro fall seminar in Morris. “Last year about this time, prices took off, and we’ve had high prices since.”

USDA projects farm debt levels could remain relatively unchanged this year at $443.9 billion. But the debt to asset ratio could slip from 14.02% to 13.64%, which would be the first reduction since 2012.

Margins could tighten in the year ahead, though. Current U of I estimates use average prices of $12 per bushel for soybeans and $4.50 for corn in 2022, down from $13.70 and $5.75 this year, respectively.

The U of I also projects record-high, non-land costs next year on Illinois farms. Fertilizer costs on Aug. 26 averaged $750 per ton for anhydrous ammonia (up $298 from the same time last year) $713 for diammonium phosphate (up $300) and $621 for potash (up $286), according to the Illinois production cost report. Seed costs could jump 8-10% next year, according to U of I estimates.

“All inputs have gone up,” Schnitkey said. “Those (fertilizer prices) are substantially higher than in recent years.”

The higher input costs will squeeze farm margins in the year ahead, which leaves the income outlook dependent on a continuation of strong commodity prices.

“Next year’s income is still projected to be profitable, even with higher costs,” Schnitkey said. “We’ll see if those (commodity price levels) hold. Prices will come down if we have large acreage responses (around the world) and good yields.”