After years of struggling in a downturned agriculture economy, Iowa corn and soybean growers may find opportunities to secure breakeven, or profit opportunities in 2020. That’s the conclusion of a new analysis released by the Iowa Farm Bureau Federation this week. The report cites an improved price outlook and expectations for lower production costs.
“This analysis is just one point in time, and conditions could change, but there does seem to be a ray of sunshine this year. It’s very different from last year, when it was hard to find anything positive for soybeans or corn,” says Sam Funk, IFBF senior economist. “While every farmer has different costs and breakeven points, trends in prices and costs for 2020, in general, appear to be moving in a more positive direction for farmers.”
Potential for positive margins
Funk notes that the potential for positive margins gives farmers a greater opportunity to use critical marketing tools, such as crop insurance and forward contracting, to secure a breakeven price, or even generate a profit.
“People ought to have a good idea of what they have locked in for production costs for 2020. They can use the crop insurance price guarantee and try to put together a marketing plan that helps them protect themselves from losses,” Funk says.
The IFBF analysis generated 2020 per acre income projections using November 2020 futures contract levels in late January for soybeans and December 2020 contract for corn. Basis levels, the difference between future prices and bids from the local elevator, were calculated using figures gathered around the state by the Iowa Department of Agriculture. IFBF used cost-of-production estimates from Iowa State University Extension’s annual survey of production costs, fixed and variable, for corn and soybeans.
IFBF’s analysis shows farmers could break even growing soybeans in 2020 on acres that yielded 62 bushels or better. A breakeven mark is a sharp contrast from the past couple years when soybean prices have felt the pain of the trade tension between the U.S. and China, traditionally the top export market for U.S. soybeans.
“If we could actually get to break even on soybeans — when we’ve been having such a large portion of that crop in storage and weighing down on prices — it sounds pretty good,” Funk says.
Prospects better for corn than beans
For farmers planting corn, the outlook from the analysis looks even better. On corn acres that grew soybeans in 2019, the analysis shows that expected income would be 36 to 37 cents per bushel above cost, reflecting an opportunity for profit. For farmers planting corn after corn, costs would still be higher than the expected return, but would be closer to the breakeven mark.
IFBF’s study found that some production costs are moderating, including fertilizer and cash rent, but the larger issue is the overall condition of markets. The recent signing of trade deals with Mexico, Canada and Japan, as well as the first phase of a new trade deal with China, are putting the market back on more stable footing, according to Funk.
While IFBF’s analysis found welcomed upside potential for corn and soybeans in 2020, Funk cautions that many farmers are still digging out from heavy debt loads. Farmers along the Missouri River and other parts of the state are still feeling pain from historic flooding and the current financial condition of the ag economy.
“There has been a lot of negative news, and a lot of farmers are still healing from last year,” he notes. “However, we are, at least, seeing some bright spots of opportunity from our analysis.”