2014-12 PAER: Agricultural Outlook for 2015

December 1, 2014

Welcome to Purdue’s snapshot of the Indiana agricultural economy for 2015. There’s some positive news but also major areas of concern. First the good news! Lower grain prices have reduced feed costs and animal producers are having record positive margins in 2014 and 2015. All major live-stock species are seeing record high farm prices for animals and animal products including eggs, milk, chickens, turkeys, cattle and hogs. Also, total Indiana net farm income appears to be holding for 2014 near $2.7 billion, similar to 2013. But, there are already disturbing signs that the income picture is changing quickly as the grain sector is forced to adjust to much lower prices with almost no decrease in production costs, at least not yet. Grain farm margins have largely collapsed as record Indiana yields in 2014 have not been enough to offset price declines. If we just consider crop farms, their incomes are expected to be down more than 30% in both 2014 and again by that margin in 2015. So, it is the high incomes from animal related farms that are holding up the total net farm incomes for 2014.

Indiana agricultures biggest problem is that crop prices have fallen below the record high costs of production. A number of farms will have negative margins at current expected prices. Our Purdue opinion is that grain prices are in a multi-year period of downward moderation from the high-price era. If correct, crop margins will be tight and adjustments will have to occur during the coming years.

The implications for crop agriculture may be substantial. Almost every-one in crop agriculture from input suppliers, to farm operators, to land-lords got use to high revenues. Now crop revenues may be sharply lower in coming years and downward adjustments are likely. Who is going to take less as this downward adjustment period proceeds? Will input suppliers cut prices? Will producers cut their application rates? Will farmers’ margins collapse? Will cash rents drop? Will land values fall? Keep reading?

Articles in this Publication:

The Economy Picks Up in 2015

Agricultural Trade Prospects Weaken

Food Price Inflation to Slow

Profits Bloom for Cow-Calf Producers

Dairy Enthusiasm Edging Lower

Hog Profits Rock in ’14, Stay Strong in ’15

Grain Outlook: Tight Margin Years

Crop Costs Stay High and Returns Collapse

Government Program Builds Farm Safety Net

Farmland and Cash Rent Outlook

Latest Articles:

Indiana Farmland Prices Grow at Record Pace in 2022

August 10, 2022

Indiana farmland prices grew at a record pace between June 2021 and June 2022, according to the recent Indiana Farmland Value and Cash Rent Survey. Statewide, the average per acre price for top quality farmland increased by 30.9% to $12,808; average quality farmland increased by 30.1% to $10,598; poor quality farmland prices increased 34.0% to $8,631. Across all quality grades, farmland prices exceeded the previous highs set in 2021.

READ MORE

Trends in Farmland Price to Rent Ratios in Indiana

August 10, 2022

A standard measure of financial performance most commonly used for stocks is the price to earnings ratio (P/E). A high P/E ratio sometimes indicates that investors think an investment has good growth opportunities, relatively safe earnings, a low capitalization rate, or a combination of these factors. However, a high P/E ratio may also indicate that an investment is less attractive because the price has already been bid up to reflect these positive attributes. This paper computes a ratio equivalent to P/E ratio for farmland, the farmland price to cash rent ratio (P/rent), and discusses trends in the P/rent ratio.

READ MORE

Farmer optimism about short-term US farmland values weakens

August 10, 2022

Farmers purchase the majority of US farmland. The 2017 USDA Census of Agriculture reports more than 60% of farmland is owned by farmers. Farmers’ farmland value expectations are an important driver of farmland prices.

READ MORE

Delivered right to your inbox

The Purdue Agricultural Economics Report is a quarterly publication written by faculty and staff from the Department Agricultural Economics at Purdue University.

By joining this mailing list, you will receive an email when a new publication is released. This mailing list is kept solely for the purpose of sharing the report and is not used for any other purposes.