2017 Outlook: Higher Prices, Lower Yields
The Wednesday seminar at the Indiana Illinois Farm Show examined the two biggest unknowns in agriculture: the weather and the markets. Hoosier Ag Today meteorologist Ryan Martin and Purdue Ag Economist Chris Hurt presented their outlooks on the weather and on the farm economy for 2017 to a capacity crowd.
Martin sees a very active and cold winter as well as a wet spring that may delay planting, “Temperatures will likely be below normal in March, and my computer models suggest a wet April and May. This will likely mean a stop and go planting season.” Martin predicted that crops will likely get off to a late start which will reduce yields and push harvest back into late fall. While some weather services are calling for a summer drought, Martin is not ready to go there yet, “I am not an alarmist. We will likely not have great weather, but I think we will have good weather.” He expects trendline yields to be the norm for 2017.
If trendline yields will be the norm next year, that will lead to higher prices for soybeans says Dr. Hurt, “I think we will see about 4% more acreage on soybeans; but, with lower yields, you will have a smaller crop. That will tighten carryover and increase soybean prices by about 50 cents per bushel.” Hurt sees soybeans at harvest averaging about $9.50 per bushel.
On the corn side, Hurt projected, “We are going to have less acreage and a normal yield that will increase corn prices by about 30 cents per bushel.” Hurt sees corn carryover being cut by around 200 million bushels. Hurt added that, over the next 3 years, corn prices will reverse their trend of the past two and generally move higher.
Even with these higher prices, farm losses will narrow, but 2017 is still not likely to be a profitable year for producers. “We will begin to narrow farm losses in 2017 and 2018, but not likely move to a profitable situation until 2019,” said Hurt. He said cash rent and fertilizer costs are coming down, but very slowly. He urged producers to continue to focus on cost reduction for the coming year, “There are farms that have not cash flowed for 3 years already, and now we are talking about losses in 2017 and 2018. These operations are going to have to work with their lenders to find a way to hang on.” Hurt suggested that producers put together a plan on how to survive for the next 3 years.
Thursday’s seminar will focus on managing risk with Bill Gentry from Risk Management Commodities. The seminars this year are sponsored by Farm Credit Mid-America and Brodbeck Seeds.