Indiana's agricultural outlook for 2018.

• Author: Hurt, Chris
• Position: Statistical data

The year 2018 will be the fourth consecutive year of weak incomes causing financial erosion for most farm families. Low incomes are resulting in weak cash flows, and farmers are turning to their lenders for increased borrowing.

Midwest crop agriculture is going through a boom-moderation cycle. From 2006 to 2013, grain prices rose and pushed Indiana farm incomes upward. For the calendar years from 2008 to 2014, Indiana farm income averaged about $3 billion per year. Starting with the 2014 crops, grain supplies rose sufficiently, and demand growth rates slowed. As a result, the U.S. and the world began producing more than was being consumed--resulting in larger inventories and sharply lower grain prices. In the most recent three years, average annual Indiana farm income has dropped to about $1.5 billion per year--a 50 percent decline from the boom years (see Figure 1).

Figure 1: Indiana net farm income In billions of dollars 2003 $1.3 2004 $2.5 2005 $1.5 2006 $1.3 2007 $1.8 2008 $2.8 2009 $2.0 2010 $2.0 2011 $3.4 2012 $2.8 2013 $5.5 2014 $2.8 2015 $1.2 2016 $1.5 2017 $1.6 Source: U.S. Department of Agriculture, with a Purdue University estimate for 2017 Note: Table made from bar graph. National yields were above average in 2017 for corn, soybeans and wheat. Inventories will remain high with low prices. Corn prices will be at their lowest level in 12 years. Soybean prices will be near the lowest in 11 years.

Indiana crop revenues are expected to be lower in 2018 since most 2017 crops will be marketed in 2018. Indiana corn yields at 181 bushels per acre were up from last year, but prices are expected to drop from $3.62 a bushel to about $3.45 a bushel for the 2017 crop. Indiana soybean yields were 2.5 bushels per acre lower this year and Indiana prices will drop from $9.69 a bushel to about $9.50. Crop revenues will be down about 3 percent in 2018.

Costs of production have been moderating for the past few years with tight crop margins. Reductions have been led by lower fertilizer prices and by some downward adjustment in cash rents and machinery values. Costs of production may be fairly stable for 2018 crop production. However, costs are expected to rise for soybeans because it is becoming more difficult and costly to control weed infestations.

While most of 2018 will be a repeat of tight crop margins, there are brighter price prospects for 2018 crops that will be marketed in the fall of 2018 and into 2019. Current futures markets are...