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.

Indiana Net Farm Income: USDA with 2017 Purdue Estimates

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

Articles in this Publication:

Farmland Value Outlook

Cash Rents: Pressure is Downward

2018 Purdue Crop Cost & Return Guide

Soybeans Pay Bills With Friendly Price Tone

Corn Prices Depressed by Large Inventory

Pork Industry Favored by Strong 2018 Demand

Dairy: “Butter” Hold On – Tight Margins Continue!

Beef Supply To Rise: Can Strong Demand Hold Cattle Prices

Low Farm Prices Contribute to Modest Food Price Changes

Farm Policy: Perspectives on the New Farm Bill

Trade: NAFTA Uncertainty Looms Over U.S. Ag

Strong U.S. Economy: But a Lid on Growth

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.