Farmers cut production costs in 2017, but more cuts will be needed in 2018. Surveys from Purdue suggest that land prices, fertilizer, and other production costs are coming down. Ryan Harrell, with First Farmers Bank and Trust, says progress is even being made on cash rent agreements, ”While those are tough conversations to have, landowners are beginning to realize that crop prices are going to remain low and are willing to make adjustments.” Estimates are that cash rent rates in Indiana have declined between 9% and 14% since the high several years ago.
Purdue economist Dr. Chris Hurt says family living costs are also being cut, ”Farm families are making cuts in living costs, and many farming operations are make making any new capital purchases such as new buildings.
Hurt says cost cutting will have to continue for at least the next two years, “Our budgets indicate farms may need to cut costs by 3% each of the next two years to get costs low enough to make a profit with continued low commodity prices.”
But, will lenders stay with growers for another 2 years? Harrell says they will. “Most farm banks are willing to stick with farmers,” he says. “At First Farmers, we are committed to stay with our farmers in good times and bad.” He says the best way to keep your lender on your side is to have a detailed plan and a good handle on production costs.