By TIM ALEXANDER

Illinois Correspondent

EAST PEORIA, Ill. — The odds of farmers profiting from soybean production in 2019 are dependent on whether trend-line yields are again eclipsed and the amount spent by farmers on input investments, according to University of Illinois agricultural economist Gary Schnitkey.

Speaking to about 80 producers at an ILSoyAdvisor Better Beans seminar in East Peoria on Feb. 19, he laid out a doomsday scenario that could result in net farm income losses of up to $60,000 for a producer this year.

“Minus-$60,000 with trend yields would reflect the worst incomes since we have been keeping records,” Schnitkey said. He told farmers it is important to understand the relationship between trend yields and profitability.

From 2013-18, soybean yield per acre in Illinois rose by 6.5 bushels, while corn yield per acre grew by a whopping 20 bushels. “Meanwhile, soybean yield has increased by only 2.5 bushels in Iowa and 3.8 in Indiana, so the first question is, why is Illinois doing so much better than the other states around us?

“I think the obvious explanation is that Illinois has much better farmers,” Schnitkey deadpanned, to the delight of those assembled. “Actually, it might have something to do with the weather as well.”

He also cautioned farmers that unlike in 2018, they will likely not receive another round of Market Facilitation Program (MFP) tariff-loss assistance checks this year, so he advised them to build their 2019 budgets with this in mind.

“Without (MFP assistance) we are going to have even lower incomes in 2019. There will be a much better chance for MFP payments resuming in 2020, which is an election year,” Schnitkey said. “Looking at 2019, we are projecting lower incomes for three reasons.

“There will be no MFP payments and lower soybean prices – we are looking at cash bids for fall delivery right now at $3.60 to $3.70 for corn and in the $9.10 range for soybeans, but my outlook is for $8 to $8.50 soybeans this fall. And, third, an average or similar South American crop to last year appears to be the case.”

U.S. growers have not so far declared a large shift away from soybeans. Adding to the dour outlook is rising costs for anhydrous ammonia and other fertilizers.

“We know that costs are going to go up this year, and the big cost that will go up is fertilizer,” Schnitkey said, adding on an average-sized farm, “with anhydrous ammonia costs increasing by around $100 per ton, if you put on 220 pounds of anhydrous ammonia you have an $11 cost increase per acre.”

Other non-land cost increases for farmers in 2019 include drying, fuel and oil, seed and building repair/rent. Based on the recent trend of lower average soybean prices (this plummeted to $8.58 in October 2018, after bringing more than $10.43 since 2006), higher non-land costs averaging $10 per acre for soybeans and $25 for corn, the suspension of MFP payments and an expected average South American crop harvest, U of I economists have set their 2019 income projection for soybeans at $8.50 and corn at $3.60 – with cash rents remaining the same.

If there is another trend yield-busting harvest this fall, the bottom could fall out for prices, Schnitkey cautioned.

“A lot of you here are seeing 70-bushel soybean yields and 240-bushel corn yields,” he said. “A return to trend yields will result in your worst income on record. This (projection) does not necessarily point to a financial crisis for most farms.

“We should be thinking about this year cautiously, saving some of the income we have generated in previous years and seeing what this year brings. But if you don’t have much working capital, this could be a bad scenario.”

Conversely, producers could show net farm income of up to $50,000 in 2019 under the following scenarios, according to Schnitkey:

•Above-trend yields and $4 corn and $9.50 soybean prices

•Above-trend yields and MFP payment

•A drought with over-$5 corn and over-$10 soybean prices

“Though I no longer see above-trend yields with MFP payments in my crystal ball, this is agriculture and these other scenarios could and have occurred,” he explained. “For now, see if you can pre-market your 2019 crop and see about taking your crop insurance to a higher level.

“I would also suggest talking to landowners; we haven’t yet seen any downward movement on cash rents, but if we have another down year, you will be looking at those rents coming down.”