PEORIA, Ill. – Farmers attending the 2024 Greater Peoria Farm Show on opening day, Dec. 3, came in with low expectations for purchasing new equipment in 2025 due to projections for yet another year of below-breakeven farm income.

On hand to offer further advice for farmers who are looking to cut costs in FY2025 was University of Illinois farm economist Gary W. Schnitkey, who offered a seminar on managing farm financial risk and how to become a “low-cost” producer.

Schnitkey, a soybean industry endowed professor in agricultural strategy and Gardner Agricultural Policy fellow, began his “Farm Marketing Strategies in Low-Income Times” seminar with a look at average corn and soybean values from 2006, the year of the “ethanol boom,” through 2022, when prices began to crash for both commodities. It’s that average – $6.54 per bushel corn and $14.20 per bushel soybeans – that the economist said farmers should be eyeing in terms of recovering from net-zero returns beginning in 2022.

“If we have a major drought in the Midwest in 2025, how high would we go? I don’t know, maybe $5.50 to $6 (per corn bushel)? Even a drought isn’t going to push us up to that (average) because of the (over) supply situation we’re in. My prediction…is that it is going to be a long time before something pushes those prices up” said Schnitkey, adding that he sees corn prices hovering around the $4.40-$4.80 per bushel level for the foreseeable future.

In addition to oversupply (U.S. corn stocks were at 49.2 million tons as of Dec. 3), corn and bean prices will likely remain at their current levels due to the expansion of farmable acreage in Brazil and other exporting nations, according to Schnitkey. In addition, concerns about meat consumption in the developed world and the future of biofuels are casting shadows on the global demand for corn. Brazil is also slowly building up the infrastructure necessary to deliver their crops to export terminals.

With these price plateaus in mind, the farm economist offered strategies for managing financial risk in 2025, including taking advantage of opportunities to grow specialty crops such as non-GMO soybeans and food-grade corn to contracted buyers, or organic products. Marketing with on-farm storage is another strategy that should be employed when at all possible.

In addition, Schnitkey’s strategies for becoming a low-cost producer and managing the financial challenges of the FY2025 marketing year included applying crop nutrients at a university-recommended rate, accepting every government payment that is offered, delaying capital purchases (with the possible exception of purchasing infrastructure for on-farm crop storage), developing a land rental strategy, conducting a cash flow and working capital burndown, identifying an off-farm income source and, when at all possible, purchasing farmland.

“This is, to me, the number one question: what are you going to do about cash rents?” Schnitkey asked the producers in attendance. “There is a really big divide between owning land and renting land. People who own land and have it reasonably well paid off aren’t doing too bad. The cash rent situation is one we are going to have to begin to question.”

In the 1990s renting farmland was a good strategy, he continued, though in today’s competitive marketplace rental rates can be a non-starter for both beginning and experienced farmers. In today’s environment, only during high-income years can farmland rental be considered a solid strategy.

“We’re farming for the next boom, and we’re a bit skeptical of when the next boom is going to happen,” Schnitkey said. “If you’re a younger operator with high cash rent, how long can you do this? You’re going to have to look at your cash flow really closely. When you are doing your tax work, do a cash flow and look at the working capital burn at the same time. If you’re a young producer, find another source of income. Consider off-farm employment with benefits.”

Possible sources of additional on-farm income include adding a side-business such as contract feeding operations and custom seed work. For advice on dealing with increased family living expenses, Schnitkey recommends utilizing resources offered by Farm Business Farm Management (FBFM) of Illinois. 

For more detail on Schnitkey’s presentation, see the article “Perspectives and Strategies for Dealing with Low Farm Incomes in 2024 and Beyond” (Schnitkey, Nick Paulson, Brittney Goodrich and Jim Baltz, Department of Agricultural and Consumer Economics-University of Illinois; Brad Zwilling, Illinois FBFM Association and Department of Agricultural and Consumer Economics-University of Illinois; and Karl Zulauf, Department of Agricultural, Environmental and Development Economics-Ohio State University) at www.farmdocdaily.illinois.edu.