2017-12 PAER: Agricultural Outlook for 2018
December 1, 2017
Welcome to our outlook issue for agriculture in 2018. Agriculture is continuing to go through adjustments after a boom period from 2008 to 2013. During that boom, Indiana farm incomes averaged near $3 billion per year. In the most recent three years, incomes have dropped to an annual average around $1.5 billion-a 50% decline.
Continued adjustments in 2018 are expected with little improvement in incomes. The 2017 U.S. corn and soybean crops were large and inventories are high. Prices are expected to be somewhat lower and Indiana revenues from crop production will likely be down, especially for soybeans due to lower yields and lower prices. Corn inventories are particularly large and prices for the 2017 crop are expected to be at the lowest level in 11 years. Futures markets anticipate some improvement in grain and soybean prices for the 2018 crops, but that is still another growing season away.
Grain margins are expected to be tight and even negative for some for 2018 crops. Tight grain margins along with high- er interest rates could put additional downward pressure on farmland values. Producers will need to continue driving costs per bushel lower. Some further progress is expected in 2018 in lowering overall costs per bushel including cash rents.
The animal sector will continue to expand with the low feed prices. That will be 1% to 3% depending on species. Even with more supply, prices may not drop much due the strong economic growth expected in both the domestic and export markets.
Beef cattle and milk prices may drop modestly, hog prices are expected to be near unchanged, and egg and turkey prices are expected to increase modestly. Incomes for the animal sector are expected to be modest and similar to 2017 for Indiana. Margins for the dairy sector will remain tight.
2018 will be the fourth year of reduced incomes. Some further deterioration of the financial positions on most farms is expected. Cash flow is tight and lower land values will continue to erode some equity. Indiana farm families generally came into the downturn with very strong financial positions built up during the boom, so most are working with their agricultural lenders to bridge the downturn until sufficient adjustments are made to lower costs or see prices improve.
Get all the details by reading these articles from Purdue experts!
– Chris Hurt, Editor and Professor of Agricultural Economics