Careful marketing management will be a key in the coming year as tight margins emerge.
In a Dec. 19 webinar, Purdue University ag economists Michael Langemeier, Nathaneal Thompson and James Mintert looked at net farm income for 2022 and said it had been one of the best years since 1973, but the outlook for 2023 was not so rosy. Farm loan interest rates are likely to be higher when next year’s budget is made, as interest rates have not been this high since 2007.
“From a management perspective, it can be important to look at what a sustained high interest rate looks like in your plans,” Minintert said.
Fertilizer costs will also figure prominently in the 2023 outlook. Based on the Illinois production cost report, many inputs have doubled in the last two years. The combination of inputs, interest rates and factoring cash rents has lowered income projections.
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“The improvement in crop prices has not kept pace with the cost side,” said Mintert. “We don’t have data for November and December, but the story remains the same. This story is shorter.”
Langemeier said he expects $6.13 a bushel to be the break-even price for corn at average land productivity.
“The average break-even price is over 31% higher than in 2021,” he said.
The projected break-even price for soybeans is $13.57 for average production acres, a smaller increase than corn.
That leaves the question as to whether the market will support these levels next year. Nathan Thompson said base levels and futures markets need to be managed separately in these times of tight margins. The further west one goes along the corn belt, the stronger the base levels were due to lower yields. That could lead to a trickle-down effect in the east this winter or spring.
“A lot of people probably have crops that they’re waiting to market until after the beginning of the year,” Thompson said. “There might be some base opportunities if they pull corn east to west.”
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