But 2010 Outlook Looks Brighter

University of Illinois economists project net farm operator returns for Illinois growers in 2009 at minus $8 per acre for corn and minus $15 per acre for soybeans, the first negative returns for the decades beginning 1990 and 2000.

"Lower 2009 returns are caused by higher input costs and declining commodity prices," says Gary Schnitkey, University of Illinois economist. "In 2009, non-land costs for corn are projected at $517 per acre, $89 higher than the 2008 non-land costs of $428 per acre. On the commodity price side, farmers received an average of $4.05 per bushel for corn in 2008. It's expected that they will receive $3.25 per bushel for corn in 2009."

The projections are based on crop budgets from the Farm Business Farm Management System (FBFM), yield estimates from National Agricultural Statistical Service (NASS) and revised commodity price projections.

Based on estimates released by the National Agricultural Statistical Service, 2009 yields in illinois are projected at 200 bushels per acre for corn and 51 bushels per acre for soybeans. These yield estimates are slightly above 2008 yields of 199 bushels for corn and 50 bushels for soybeans.

The 200-bushel expected yield for corn is above the 5-year average yield of 188 bushels per acre. The 51-bushel soybean yields expected for 2009 are below the 5-year average of 54 bushels per acre.

Returns in 2009 include an ACRE payment on corn of $25 per acre. This $25 payment represents an average payment across acres enrolled and not enrolled in ACRE. ACRE payments, based on a $3.25 season-average price, are projected above the $25-per-acre payment for farms enrolled in ACRE and would be in the $60-per-acre range.

The 2009 returns could vary from the above projections. At this point, changes in commodity prices have the most potential to change returns. Increases in corn and soybean prices will increase returns while declines in prices will reduce returns.

"An individual farm can have large variance from these averages because of yield, price or cost differences from the averages. In 2009, there will be sizable variations in non-land costs across farms, as fertilizer prices varied greatly between the fall and the spring. Timing of purchase will have a large impact on non-land costs," Schnitkey says.

FBFM budgets also showed that, in 2008, cash rent in central Illinois averaged $197 per acre for high-productivity farmland. Cash rent is projected at $210 per acre for 2009.

"These 2009 returns indicate that farms will likely face financial stress. However, returns in 2007 and 2008 were above average and many farmers built financial reserves that will carry them through the low income year of 2009, and I don't expect widespread financial difficulties across grain farms in the Corn Belt," Schnitkey adds.

He projects that net operator returns for 2010 will rise from 2009 levels to $94 per acre for corn and $84 per acre for soybeans.

"The higher 2010 returns are based on lower non-land costs. Non-land costs for corn are projected at $440 per acre in 2010, down by $77 per acre from 2009 non-land costs of $517 per acre.

"Much of the decline in non-land costs is due to lower fertilizer prices. Fertilizer prices used for 2010 projections are $400 per ton for anhydrous ammonia, $400 per ton for DAP and $600 per ton for potash. By way of comparison, anhydrous ammonia prices were above $1,000 per ton during the summer of 2008," Schnitkey says.

Budgets for 2010 contain an estimate of $3.75 corn and $10 soybeans. Currently, these prices are above bids available on futures markets.

"It's likely that the high-returns period experienced during 2007 and 2008 is over and crop farming now faces agricultural returns closer to historical averages," Schnitkey says.