
Though any investor is quick to point out that “past performance is no guarantee of future results,” farmers often find wisdom in looking to prior years that give today a sense of déjà vu.
In terms of the ag economy, it might be useful to check in on what happened in 2013-14, according to Owen Wagner, grains and oilseeds senior analyst with Rabobank.
“Where we’re at today bears a strong resemblance to where we were then,” he says. “That feels like a good place to start to look at what kind of lessons we have learned from that previous downturn and what sort of patterns are bearing out similarly to that prior period.”
Wagner is particularly interested in the relationship between commodity prices and input strategies. Farmland prices can remain stubbornly static, especially in areas where sales and rental availability are relatively scarce. But that’s not the case for some other inputs, according to Wagner.
“The best example is the relationship that comes with machinery,” he says. “And there’s a good reason for that — it’s capital-intensive. So, if a farmer is experiencing a downturn in their operation, they’re going to put that spending on hold.”
Interestingly enough, there’s not really a price response for new equipment, Wagner adds — but the volume of available machinery might trend lower.
“Whereas with used equipment, you see both,” he says. “You see a downturn in both price and volume of used equipment changing hands.”
Keep or cut?
While many farmers delay farm machinery purchases in a downturn, they are more cautious about trimming seed purchases, Wagner says.
“Obviously, seed is really the engine that drives production today,” he says. “Everything rests on the genetics.”
Still, farmers can pump the brakes at the margins, Wagner says. For example, you can reduce planting densities for some crops, such as soybeans, wheat and cotton. That’s not necessarily the case for corn, however.
“The trend — agronomically speaking — has been to increase densities for corn,” he says.
Larger scrutiny will likely be placed on so-called “discretionary products” like biologicals moving forward, notes Sam Taylor, farm inputs analyst with Rabobank.
That’s because the dynamic is different when you’re chasing a three-times to five-times return on investment when applying such products.
“That three-times is more difficult to achieve in a tighter environment with a lower cost structure,” Taylor says.
“With these lower margins, having to purchase these inputs with borrowed money means there’s going to be a lot more scrutiny applied than there has been in the past,” he adds.
Pencil out production costs
“Something has to give,” says Jacqui Fatka, CoBank lead economist for farm supply and biofuels, as she reminds farmers to pencil out their exact cost of production.
Some farmers still take those figures for granted or don’t update them enough, Fatka says. This is an environment where a 10-, 15- or 20-cent futures move could make the difference between making money and losing money, she says.
“As we head into a continued constrained margin environment, that’s going to become even more important,” she says. “How you market your crop is going to be very important in balancing some of the inputs that we know are not going to come down rapidly.”
Kentuckian J.D. Burns is one farmer thinking about long-term expansion and maintaining profitability. That includes everything from exploring alternative crops, such as seed soybeans and popcorn, to comparing input prices more thoroughly.
“I shopped around for everything I bought this year,” Burns says. “If you don’t do that, you don’t really know what you’re getting price-wise.”
Burns also is proactive on his marketing plan. He recently started using basis contracts. While he says it’s “nothing special,” every little bit counts.
“When so much money is on the line, it’s hard not to do that,” he says.
More hard times ahead?
The University of Missouri Food and Agricultural Policy Research Institute recently released an update to its annual baseline farm economics report, and bullish data points were few and far between.
Specifically, FAPRI is anticipating that crop prices in the current marketing year will remain similar between 2025-26 and 2029-30. That includes:
corn prices averaging $4.12 per bushel
soybean prices averaging $9.89 per bushel
wheat prices averaging $5.70 per bushel
FAPRI also adjusted farm income for inflation between 2022 and 2025, noting total losses of $67 billion. But despite this 35% drop, inflation-adjusted net farm income was still above levels experienced between 2015 and 2020.
Rents, values both up
As for land trends, USDA reported average cropland rental rates and farmland values actually increased this year. FAPRI does note that “slightly declining” rents and land values are projected during the next two years.
“FAPRI’s baseline projections implement plausible assumptions, given current conditions, to help agriculture stakeholders understand what they could expect in the next few years,” per FAPRI director Pat Westhoff. “Reports like the various baseline updates can be used as benchmarks to evaluate agricultural policy changes or how other economic drivers can impact agricultural markets and farm finance conditions.”
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