Ag Outlook 2017
Yields Projected Up but Production Costs Also Rising
Bryce Knorr, senior analyst with Farm Futures Magazine, recently presented at an event Citizens National Bank co-hosted with Williamson Insurance Agency. Knorr pointed out 2017 is the first year since 1983 that farmers plan to plant more soybeans than corn and pointed to increased production costs as the reason for lower profit margins than the 1980’s. Expected acreage of corn planted is projected to be down 3.7% while soybeans are projected to be up 8.5%. According to Knorr the USDA estimates yields for corn will be on average 174.6 bushels/acre and bean yields will be 15% higher than 2016 at 52.1 bushels/acre.
He predicts net farm income will be down again in 2017 and noted that the debt to asset ratio is trending upward – “although nowhere near the level of the 1980’s,” he assures. He feels rising interest rates may dampen land prices, although he was optimistic that there’s interest by money managers and hedge funds in buying more ag contracts. Average cash rent in Ohio is $150 per acre, which is flat from 2015-2016, which also plays into the cost of land prices not increasing.
Knorr’s advice to farmers was to remain cautious. He notes many farmers have purchased land or new equipment over the past few years when prices were at all-time highs. The difference he notes from the 1980’s crisis however was that most of them used excess cash to make those purchases rather than leveraging everything through loans. “This puts current farms in much better positions than in the past,” he notes.
In addition to analyzing and writing about the commodity markets, Knorr is a former futures introducing broker and is a registered Commodity Trading Advisor. He conducts Farm Futures exclusive surveys on acreage, production and management issues and is one of the analysts regularly contracted by business wire services before major USDA crop reports.