From The Fields: Grain Harvest 2024
By Lance Lansing
As is done every year in September, planted and harvested acreage estimates for corn, cotton, and soybeans are reviewed based on all available data, including the latest certified acreage data from the Farm Service Agency. The USDA’s Supply/Demand Report on 9/12/2024, reported the outlook for harvest yields as “good” for our part of the country. USDA is estimating record yields in both corn and beans for southern Wisconsin and that will lead to even bigger increases in supply so we should expect to see lower prices for 2025. According to USDA data, production for corn increased by 39 million bushels to 15.186 billion. That is 30 million bushels above expectations. Record yields are projected at 183.6 bushels per acre vs. 183.1 bushels per acre predicted last month. Old Stocks are below expectations at 1.812 billion due to stronger exports and increased ethanol production. New stocks came in above expectations at 2.057 billion.
Bean production was trimmed by 3 million bushels to 4.586 billion which was 23 million below expectations. Record yields were left unchanged at 53.2 bushels per acre. Old stocks were cut 5 million bushels to 340 million in line with estimates. New crop stocks cut 10 million bushels to 550 million which is 34 million below expectation. Ending stocks were left unchanged at 828 million bushels.
As a result of the elevated yield expectations, working capital will probably be negative for most grain farmers in 2024. That could lead to increases in short-term operating loans. That could also mean a sharp decline in machinery purchases and capital improvements.
According to a recent survey done by Illinois FBFM, the cost of production for corn on owned ground hovered around $600/acre from 2015 to 2021 but has since jumped to $800/acre plus. When adding in cash rent that number increased to an all-time high of $1,182/acre in 2023. Projections are for only a slight reduction to input prices in 2025, leaving little room for the farmer to offset lower market prices. Improvements to input prices may come from anhydrous and nitrogen prices but Dap and Potash will likely remain steady. Diesel prices will be affected by who sits in office but has been trending lower. Cash rents should drop but landowners are going to be reluctant to follow through, especially those who owe money and are paying higher interest rates. The expected difference is only $25/acre. Net income per acre hit a record high of $500/acre in 2022 and is estimated to be near zero or below for 2024 and 2025.
As bankers, we need to recognize that our grain producers are in a downward trend after 2-3 years of profitability. We can build value in our relationships by reminding our grain clients to get back to the basics. Make sure they know their cost of production. Encourage them to spend time on their financial statements and reporting. Control costs including inputs, land rents, capital purchases and family living. Debt per tillable acre has increased from $267 in 1992 to $809 today, and it is expected to continue to increase with the cost of land. Debt to asset ratios have dropped from 32% to 17% over the same time signifying that most of our landowners are 60 years old and older. This means that farm succession planning is more important than ever for our producers.
This is a time that our grain producers will need the support of their bankers. It will be our job to make sure they have the tools and knowledge needed to weather this downturn in profit. More communication will be needed to get through this to a more profitable time. We can bring value to the relationship with honest analysis, and hopefully the profitable times will return sooner rather than later.
Lansing is vice president – lending at Apple River State Bank in Darlington. Lansing also currently serves on the WBA Agricultural Bankers Section Board of Directors.
