Lower prices for corn and soybeans will drive the profits of U.S. farmers down to an estimated $113.2 billion in 2014, a decline of 14 percent from last year’s record, according to the Department of Agriculture.
The forecast for this year’s income is up 18 percent from a February estimate as livestock revenues may reach an all-time high, the USDA said in a report on its website.
Gains in farmland values that climbed 8.1 percent this year are slowing. While rising hog and cattle prices have aided livestock producers, record grain and oilseed harvests are dragging profits, said University of Missouri at Columbia agriculture economist Pat Westhoff.
“It’s a reversal of fortunes,” Westhoff said. “We had several years of incredible crop-sector income, but now it’s livestock,” he said. “You’re starting to see some softness some places, and in some cases farmers are going to have trouble covering their expenses.”
Neil Jorgensen, a farmer and livestock producer in Callaway, Nebraska, expects to fetch more than $2 a pound for about 100 young cattle that he plans to sell in December, when they reach about 750 pounds. That would be the highest ever, he said.
“I’ve never seen anything like that before,” said Jorgensen, 60, who also grows about 400 acres of corn and soybeans. Prices for grains used in animal feed are lower this year, and the hay crop looks “pretty good” statewide, he said. “It’s going to be a good year.”
Income from crops will be up 6.1 percent from the February forecast, to an estimated $200.9 billion, while livestock will rise 14 percent to $209.6 billion.
The outlooks were raised because of “more optimistic price expectations” this year for both crops and livestock than the February forecast, the USDA said in its report. Soybean futures in Chicago have slumped 21 percent in 2014, while corn fell 14 percent. Hog futures climbed 11 percent, and cattle prices are up 10 percent.
Expenses for this year including seed, fertilizer and animal feed will be $368.4 billion, up 5.8 percent from the February forecast and 4 percent from 2013.
Scott Bahler, 50, who grows about 1,700 acres of corn and soybeans in Remington, Indiana, said that while increased yields will help offset some of the fall in grains prices, this year will be “a reality check” for farmers.
“There’s no doubt that more bushels will make up some of the difference,” Bahler said. “They won’t make up nearly all of it. We’ve definitely been blessed the last few years.”