One agriculture economist foresees a substantial decline in crop incomes for farmers in the next three to five years.
Chris Hurt from Purdue University in West Lafayette said decline follows a “near-perfect summer” in 2014, which created record production of corn and soybeans.
Hurt, who is no stranger to speaking about farm economics in Jackson County or around the state, said this past year will ultimately drive the incomes of crop farmers down.
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“For human consumption, for feeding the world, big crops are wonderful,” Hurt said. “But smaller crops tend to generate more income because of the pricing. This is the nature of food. When food becomes in short supply, people will pay very high prices.”
Hurt gave his annual agricultural outlook to farmers, FFA members, producers and community members Wednesday morning during the 13th annual Farmer’s Breakfast at Pewter Hall in Brownstown.
The packed event, which featured a buffet-style breakfast, was organized by the Community Foundation of Jackson County in partnership with Purdue University Cooperative Extension Service and Jackson-Jennings Co-Op.
Hurt said the net farm income for a crop farmer is expected to be $1.1 billion this year, down from $1.7 billion in 2014 and $2.5 billion in 2013.
He said these changes for farmers come in cycles, referring to the period of 2010 to 2012 when there was more demand than supply, resulting in high prices, especially for grains. That meant higher incomes for grain farmers.
Hurt said if crop production is cut 10 percent, prices tend to go up 20 percent.
“What we actually have is incomes tend to be higher when production is short because people are paying higher prices,” he said.
Hurt said producers and farmers have responded to the world’s needs, and they have expanded their productions to meet the consumption base over time. This creates balance for supply and demand, better inventories and creating lower prices.
Just last year, moderate temperatures and an abundance of rainfall during the growing period in southern Indiana resulted in big crop production. That leads to weak prices and creates lower incomes, he said.
The next three to five years will be an adjustment period for crop farmers, and they may foresee low margins, lower land values (down 5 to 6 percent) and possibly lower cash rents, he said.
“Farm families will have to tighten their belts because of family living expenses,” he said.
Hurt said they may have to be more cautious in terms of spending and costs and be more moderate with decisions. For example, some may have to reduce the amount of purchases of machinery and equipment, home remodeling, trading in their trucks and avoid adding on to machine sheds and farm buildings.
“These aren’t the most encouraging numbers … but it’s the reality,” he said.
As for the animal sector, said poultry and beef prices will be low and for hog farmers, he said there will be an uptick in supply.
In years past, high grain prices and the spread of the porcine epidemic diarrhea virus, which killed off baby pigs, caused hog farmers to lose money.
In the second quarter of 2014, hog prices per hundredweight were at $85. Purdue projects $56 per hundredweight for this year’s second quarter.
With the PED virus under control, and the reset of grain prices, Hurt said an expansion will occur.
Total meats and poultry for 2014 was 206 pounds per capita. Hurt said Purdue expects it to be 206 pounds per capita for 2015 and 210 pounds per capita for 2016.
Total U.S. net farm income for 2015 is expected to be $73.6 billion down from $108 billion in 2014.