U.S. farm income, on average, for 2018 is pegged at 35% to 40% lower than during the boom years of 2011 through 2014. Current expected farm income is at levels like those experienced in the early 2000s.

That’s how Chris Hurt, Purdue University Extension agricultural economist and marketing specialist, describes the change in farm income over the past two decades. At the beginning of 2018, Hurt and others thought this might be the year when crop farmers would see improving prices, allowing them to turn the corner on profitability.

By late summer, the picture had shifted 180 degrees. “It looks like we’ll wait another year for price improvement that will allow crop farmers to pencil in reasonable profits,” Hurt told farmers and reporters at a briefing after USDA issued its August crop report.

Soybeans are culprit
The reason many people looked for improvement in 2018 was shrinking world stocks in both corn and soybeans, Hurt says. Usage was up worldwide. Indeed, USDA still projects the average farm price for the 2018 corn crop at $3.60 per bushel, higher than the 2017 price. Hurt believes it might do even better, especially in Indiana. But some people had looked for a price topping $4 per bushel.

The two factors changing the picture are very good weather, and tariffs and trade, Hurt explains. Very good weather conditions have led to projections of record yields for both corn and soybeans in several Midwestern states. Indiana expects a record soybean yield, with corn a couple of bushels behind the 2014 record.

“The real hit is with soybeans,” Hurt says. “Corn was only off 8 cents by midday on the day the crop report was released, but soybeans were off 37 cents per bushel. The USDA average for the 2017 soybean crop was $9.35 per bushel. The projected average for the 2018 crop at the farm is $8.90 per bushel. The soybean price is expected to be down, while corn is up.”

Soybean futures prices dropped 16% from June 1 to Aug. 10, from $10.38 per bushel to $8.67 per bushel, Hurt adds.

Tariffs hammer soybeans
Tariffs imposed on China by the Trump administration, which led to retaliation by China imposing tariffs on soybeans and other crops, was more than the market could bear, especially when USDA reported in its August estimate that there appears to be a large soybean crop on the way.

Hurt acknowledges that USDA has said it will kick in $12 billion in aid for farmers, largely due to the impact of the trade war on prices. He believes $7 million to $8 million could come as direct payments to farmers.

“It will help farmers with cash flow, but we will still have depressed prices,” Hurt says.

Ironically, Brazilian farmers are asking U.S. ag economist like Hurt how long the trade war and tariffs will last. “Their soybean prices are way up, and they’re very close to making decisions on which crops to plant for the next growing season,” Hurt explains. “Everyone has questions, but no one has good answers.”