Lower crop prices and rising costs squeeze farm profit margins

By Andi Anderson

As 2024 unfolds, farmers are grappling with tighter profit margins, largely due to a drop in crop prices over the summer and rising input costs.

The U.S. Department of Agriculture (USDA) projected a challenging year for farm profits, and the outlook has only grown more difficult as prices for key crops like corn and soybeans have dipped.

Gary Schnitkey, an agricultural economist from the University of Illinois, expressed concerns about "growing pessimism" regarding corn and soybean returns this year.

In a farmdoc daily article co-authored with colleagues from the University of Illinois, Ohio State University, and the Illinois Farm Bureau, Schnitkey noted that with higher input costs, the returns on these crops might fall even further below break-even levels than during the tough years of the mid-to-late 2010s.

Schnitkey highlighted that current futures contract levels suggest that appropriate budgeting prices for 2024 crop production are around $4 per bushel for corn and $10.50 per bushel for soybeans.

These prices are significantly lower than those seen during the last low-price period from 2014 to 2019. The higher costs associated with production mean that returns for 2024 are likely to be much lower, putting additional strain on farmers.

Purdue University agricultural economist Michael Langemeier echoed these concerns, pointing out that the decline in profitability this year follows several strong years for farmers, where high crop prices led to substantial gains.

However, U.S. net farm income for 2024 is projected to be substantially lower than in 2021, 2022, and even 2023, which were all good years for the agricultural sector.

In addition to the declining crop prices, Langemeier emphasized that high input costs are keeping break-even prices elevated. He stressed the need to reduce these break-even prices to improve profitability in the face of these challenges.

The combination of lower crop prices and rising costs is creating a difficult environment for farmers in 2024, with many concerned about their ability to maintain profitability in the coming months.

Photo Credit: gettyimages-zoran-zeremski