2013 Net Farm Income Projections

 

Current futures prices suggest harvest-time 2013 prices of $5.80/bu. for corn and $12.40/bu. for soybeans. Given these prices, 2013 farm incomes likely would be above average. Worst-case incomes depend on levels of projected prices used to set crop insurance guarantees. Likely projected prices will provide significant downside revenue protection. To quantify income projections, farm incomes for a 1,200-acre Illinois grain farm are simulated and presented.

Farm Situation

Net farm income is simulated for the following farm designed to be representative of commercial grain farms in Illinois:

• The farm has 1,200 acres.
• Expected yields are 187 bu./acre for corn and 54 bu./acre for soybeans, with two-thirds of acres in corn and one-third in soybeans.
• The farm owns 120 acres, share-rents 360 acres and cash rents 720 acres. This represents the typical tenure/rental situation for farms in northern and central Illinois.
• Cash rent is $300/acre.
• Farm costs are specified at levels contained in 2013 crop budgets.
• The farm has $480,000 of debt.

 

Projected 2013 Net Farm Income

Current forward contract bids for 2013 harvest time delivery are $5.80/bu. for corn and $12.40 for soybeans. Given these commodity prices, net farm income is projected at $291,000 (see Table 1). This income would be high relative to averages. Farms of this size have average income around $207,000 for the years from 2007 through 2011.

Slightly lower price projections of $5.40 for corn and $11.80/bu. for soybeans would result in $229,000. Income projections at this level would still be above average.

Price over the next five to 10 years likely will average considerably lower than the $5.80 corn price and $12.40 soybean price indicated by current futures prices. Estimates of average, or long-run, prices are $4.50/bu. for corn and $10.50/bu. for soybeans. These long-run prices result in $85,000 of net farm income (see Table 1).