One economist is optimistic that corn and soybean farmers will be able to weather the drop in annual net cash farm income expected this year and next as agricultural commodity prices fall.
Roland Fumasi, the head of the North America food and agribusinesses division of RaboResearch, ran a simulation of annual net cash income and ending cash balance for a Illinois corn and soybean operation.
The results indicate the farm's ending cash balance would "remain strong" through 2028 despite expected decreases in annual net cash income, he said Monday at the annual Ag Outlook Forum co-sponsored by Agri-Pulse and the Agricultural Business Council of Kansas City.
"Because we've had such tremendous years and those balance sheets are so strong, we're going to be OK," Fumasi said.
Farms in other sectors may not see the same results, he said.
Dairy operations, Fumasi said, had a "great record" in the first half of 2022 when it came to building balance sheets, but saw some challenges in the later part of the year that continued into 2023.
"Frankly, 2023 has been really rough on dairy producers," Fumasi said. "But they're starting from a very, very strong cash position."
Beef producers are poised to be an outlier when it comes to income, with strong prices expected to continue amid shrinking cattle supplies, Fumasi said.
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Farmers of several crops are expected to see their cost of production decrease between 2023 and 2024, but falling commodity prices will squeeze grower margins, said Krista Swanson, lead economist for the National Corn Grower's Association.
She also cautioned that the decrease in production costs could be limited by increases in fuel or fertilizer prices.
"As these forecasts get updated and we have more real values..., I wonder if maybe the cost of production won't even decrease as much as it looks right now," Swanson said.
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