WEST LAFAYETTE, Ind. – Gary Schnitkey, a professor of agricultural and consumer economics at the University of Illinois Urbana-Champaign, said he’s heard the same philosophy from many farmers – they’re going to farm for a break-even in most years on cash rent farmland, and then wait for the high returns in a minority of years.

During the Jan. 10 Purdue Top Farmer Conference, Schnitkey mentioned two problems with that philosophy. “When are those high income years going to happen again?” he asked. “They’re unpredictable. It could be in a week, or 10 years from now. It’s probably more longer than shorter.

“The second problem with that is we’re looking at low returns now.”

The most recent high income years for farmers were 2007-2008, 2010-2012 and 2020-2022, he said. Schnitkey is also Soybean Industry Chair in Agricultural Strategy at the university.

Before he discussed strategies for farmland acquisition and machinery over the next decade, he brought attendees up to date on projected prices for corn and soybeans for the next couple years and for the next 10 or so.

The USDA has projected a $4.10 per bushel national average price for corn in the 2024-25 marketing year, and $4 in 2025-26, Schnitkey said. For soybeans, the projected price is $10.20 for 2024-25, and $10.10 for 2025-26.

“Those prices have obviously come down quite a bit from our highs which we saw in 2022, which were $14.20 for soybeans and $6.54 for corn,” he noted. “If you look at those $4.10 and $10.20 for this year, they are actually USDA Office of Chief Economist projections. We also do a 2025 projection, which would be grain produced this year, marketed through 2025 and 2026. If you just look at futures prices and delivery prices, you would come out with a projection for that year of $4 for corn and $10.10 for soybeans. So, roughly the same as we’re looking at for this year.

“USDA futures markets are sort of saying we are at the level we are at,” Schnitkey added.

For the coming year, the prices will depend on many things, but the projections assume average weather and yields, he said. A drought could mean a higher price, while exceptional yields or a trade war could cause the price to drop, Schnitkey pointed out.

Since 2005, prices for corn and soybeans have reached a plateau of about $4.40 for corn and $10.40-$10.50 for soybeans, he said. “Many commodity experts would say that commodity prices typically reach a long-run plateau and you’ll see variations around that price up and down, but they always sort of come back to that long-run plateau.

“Sometimes we’re above those prices. We were considerably above those prices in 2012, and that was caused primarily by the drought in the Midwest. That was also set up by crop shortfalls around the world in previous years.”

Before the run up to higher corn prices in 2022, corn prices were below $3, Schnitkey said.

“And then the world changed. We had the derecho in Iowa. We had a continuing hog build after swine flu in China, which brought on new demands. Then we had the Ukraine-Russia conflict which caused that spike in 2022.”

Prices are down now because “the world has gotten used to Ukraine having a war. We’ve made up production elsewhere. We’ve also had good yields elsewhere as well. So we’re now back to $4.10 and $4 for corn and $10.20 and $10.10 for soybeans.”

For the next decade, he expects the market year average price for corn to be close to $4.30, and for soybeans, $10.40.

“We have to get used to that price and if you buy the argument that I’m making, that will be the average and we will have periods above that. There will be a drought someplace. So we will have periods above that plateau. They are unpredictable.”

As for leasing high-rent farmland, Schnitkey said established farmers with a stable land base, and who don’t have much high-rent farmland, should ask themselves why they’re paying those high cash rents on that minority of the farm.

For younger farmers with high cash rents, they should ask themselves how long they will be able to do that. A younger operator is likely to have less financial resources than an older one. The younger farmer may need another source of cash income besides the farm, he said.

“The strongest farming operations are those that own a lot of their land,” Schnitkey explained. “Owned farmland has had comparable returns to the stock market, given a long enough holding period. There’s no reason to believe this will change.”

When thinking about adding a piece of farm machinery, producers should consider how much the purchase will increase the production cost per acre, he said. Think about the size of the operation, the amount of equipment and the size of the equipment. For example, a smaller combine might work well – and cost less – for your operation, he noted.