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2022 ag economic forecast good, although government payments are expected to end

A wheat field along Kansas Highway 4 in southern Saline County. Salina Post file photo “/> A wheat field along Kansas Highway 4 in southern Saline County. Salina Post file photo

Hays Post

The director of the Department of Economics at Kansas State University predicts great agriculture by the end of this year, with some slowdown in 2022.

Allen Featherstone, Professor and Head of the K-State Department of Agriculture Economics, recently spoke at an Economic Outlook Conference in Hays.

Farmers’ success over the past two years has enabled many producers to restructure their farms, clean up their balance sheets and position themselves for the future, he said.

The John Deere strike was worrying as positive results for farmers would have meant more equipment purchases before the end of the year. Another problem is farmers’ inability to source fertilizers and chemicals for next year’s crops.

Anecdotally, Featherstone said there is a lot of farmland coming into the market. This could be due to farmers using higher land values ​​for sale and retirement. New producers may come into the market because they currently view agriculture as profitable.

The profitability of the Kansas farms was the highest in Kansas in 2020. The average net income of the Kansas farm in 2020 was $ 172,530, based on a 475 farm index. However, 72.6 percent of this was accounted for by government payments.

There was a low point in farm incomes in 2015, but the number of farms with zero net income has steadily declined since that year. In 2015 it was 39.6 percent, in 2020 it was 9.5 percent. Net agricultural income of less than $ 50,000 fell from 66.9 percent in 2015 to 26.3 percent in 2020.

According to Featherstone, the debt-to-wealth ratio is also falling. Between 1985 and 2005, farmers had a debt to wealth ratio of about 35 percent.

“We are much, much safer now and this situation is improving,” he said.

Featherstone said he believes the ratio will continue to decline in 2021 for two reasons. Kansas land values ​​are up 10.5 percent last year, and the farms are likely to reduce their debt.

Crop mix shifts

Featherstone said production costs are likely to rise in 2021, but 2022 is more of a wild card.

2020 average non-irrigated variable costs per hectare of arable land
• Wheat – $ 174
• Millet – $ 205
• Soybeans – $ 250
• Corn – $ 302

Some farmers will look at the cost per acre and could grow more wheat in 2022, Featherstone said.

“In Kansas, farmers are very resilient when it comes to market planning and have no concerns about drastically changing their crop mix,” he said.

Wheat and corn did not cover total costs in 2020. Soybeans made about $ 19 per acre and sorghum about $ 90 per acre.

Since 2015, Kansas has seen a significant shift away from wheat and towards more acres of corn. The amount of wheat harvested fell by 21 percent, while the corn acreage increased by 35 percent during this period.

“I think we’ll be growing more acres of corn than wheat in the next few years,” he said. “I don’t know if the governor will go back and rename the ‘Wheat State’ to ‘Corn State’.”

The sorghum markets are heavily dependent on China, which imports around 90 percent of the world’s sorghum harvest.

The 2022 wheat crop forward bid was $ 7.10 at Salina on October 21, which looks good for next year’s wheat crop. Strong prices can mean that slightly more hectares of wheat are grown.

The prices for corn forward 2022 are also looking good.

The arable farm’s net income for 2021 is estimated at $ 227,929, of which 19.5% will be government payments. The arable farm’s net income for 2022 is estimated at $ 142,319. This assumes that there will be no government payments in the next year.

“2022 will be an encouraging year for farmers, but not as good as 2021,” said Featherstone. “2020 and 2021 are the national championship years for Kansas Farmer. You don’t get a national championship every year.”

Due to supply chain issues, the cost side of agriculture will become very important in 2022 as parts shortages are likely to persist.

Land value is likely to increase by 10 percent as farmers have more money to spend.

“Agriculture is usually pretty good inflation hedge,” said Featherstone. “It’s a tough advantage. From that perspective, people can park their money in the country.”

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