URBANA‚ÄďA new University of Illinois study projects a $27,231 drop in net income for the state's farms between 2000 and 2001. The decline is attributed to several factors, including lower corn yields, crop price reductions, and government payment reductions.

"Our projections indicate that 2001 net farm income will average $23,899 per farm, down by $27,231 from the 2000 income of $51,130," said Gary Schnitkey, U of I Extension farm management specialist, who prepared the study with fellow Extension specialists Paul Ellinger and Dale Lattz.

"Projected 2001 income is below the average income for the last four years of $36,503. Since 1995, net farm income has been lower only in 1998, when net farm income averaged $13,502 per farm."

The projection was based on 2001 yield estimates provided by the Illinois Agricultural Statistical Service (IASS) and data from 1,025 grain farms participating in the Illinois Farm Business Farm Management (FBFM) Association record-keeping and management project.

"The IASS projects 2001 corn yields to average 146 bushels per acre in Illinois, down five bushels for the 2000 average of 151 bushels," said Schnitkey. "Having 2000 yields in 2001 would increase our projected average income by about $3,300 per farm."

Schnitkey said another factor in the equation involves reduced prices due to declining value of corn.

"Crop prices declined between Jan. 1, 2000 and the time when many farmers sold the 2000 crop," he said. "We estimate a five cents per bushel loss on corn and a 45 cents per bushel loss on soybeans on 65 percent of the production in 2000. These losses reduce 2001 income by about $5,000."

As yields and prices have declined, so, too, has government assistance.

"Agricultural Marketing and Transition Act payments decrease in 2001," said Schnitkey. "Corn and wheat rates decline and the reduction in rates reduces average income by $2,400. Additionally, Market Loan Assistance payments will be reduced by 85 percent in 2001, decreasing 2001 average income by $2,000."

A recent act of Congress providing emergency payments for farmers in 2001 account for only 85 percent of last year's payments.

"Even with the reductions, however, the 2001 payments will add $11,598 to average net farm income in 2001," said Schnitkey.

Schnitkey cautioned that the projections may not hold true for every farm, as yields and other factors may vary. A one bushel change in corn yield changes average income by $669.

A one bushel change in soybean yield changes average income by $1,652. A five-cent change in the corn price changes average income by $2,376.

The soybean price increase in late 2000 illustrates the large impacts price changes can have on income projections. In October 2000, cash soybean prices were in the $4.60 range and U of I researchers projected soybean revenue using the $5.45 loan rate. Many farmers took loan deficiency payments in October receiving about 80 cents per bushel in payments. The soybean price then rose to the $4.90 range.

"If a farmer received an 80-cent loan deficiency payment and either sold grain for $4.95 in December or valued it in inventory at $4.95, the soybean bushel would have generated $5.75 of revenue," Schnitkey said. "In October, the 30 cents revenue above the loan rate was not included in income projections. At this point in 2001, price increases or decreases like what happened in 2000 are impossible to forecast."

The full report can be found at the Farm.doc site at: http://www.farmdoc.uiuc.edu/ . Click on the "Illinois Farm Economics: Facts and Opinions" icon to reach the report.