At the recent Purdue Top Farmer Conference, University of Illinois Professor of Agricultural & Consumer Economics, Gary Schnitkey said it will be difficult to build the case that corn and soybean prices will go higher over the longer term.
“What we’re probably looking at as an average if we take the prices over the next 10 years it will average something near 4.30 and soybeans something near 10.00, 10.40.”
He focused on ten-year strategies for success in dealing with static commodity prices. Dr. Schnitkey says there will be two primary areas where you may have to adjust.
“One is the land area and what are you going to do about cash rents, and the second one is machinery, and we’re going to have to, I think reevaluate our machinery purchases.”
He says the difficulty with cash rents is they need to come down and come down considerably.
“So, how’s the farm operator going to handle that, and I would also say that a strategy for building a farm in the future based on being aggressive in cash rent isn’t going to work in the next 10 years like it did in the last 10 years.”
Schnitkey suggests a focus on machinery planning. Be sure the equipment is properly sized for your operation.
“A lot of that does come down to the combine and making that combine cover as many acres as possible,” he explained. “If we’re below say 2,000 acres, we’re going to have to think about ways of sharing equipment, etc. so that we can keep those combine costs in line with where our economics are right now.”
He added there were a lot of equipment purchases in 2020 through 2022.
“That was primarily done to shelter income from taxation, and we aren’t in that situation anymore, so we have to scale those back and the next time that this comes about, or we do have some higher prices, we probably shouldn’t be using those to buy equipment.”
Tough times and tough decisions are ahead in the coming decade.
“And by the way, that’s not unusual either. Tough times are more the norm than good times.”
Dr. Gary Schnitkey is also the Soybean Industry Chair in Agricultural Strategies at the University of Illinois.
