Indiana farm incomes were strong from 2011 to 2014 before dropping sharply in 2015 (see Figure 1) and again in 2016. By 2016, estimated Indiana farm income had fallen by more than 50 percent from the strong income years. For 2017, farm incomes are expected to increase by about $0.5 billion. This will be a welcome improvement, but will still be well below the peak years.
Figure 1: Indiana net farm income 2010 $2.0 2011 $3.4 2012 $2.8 2013 $5.5 2014 $2.8 2015 $1.2 Source: U.S. Department of Agriculture Note: Table made from bar graph. Much of the improvement will come for crop producers, as yields for 2016 crops were at or near record levels. However, record national yields for corn, soybeans and wheat kept overall production high. This will cause inventories to grow and prices to remain depressed.
Lower costs have also been important to reducing crop losses. The two largest categories of cost reduction have been fertilizer and cash rents. Fuel costs were lower for the 2016 crop but are expected to be modestly higher for 2017. Machinery costs have dropped as the value of farmers' machinery has declined with the weak farm economy. Farm families have also tightened expenditures for family living expenses where possible.
Animal agriculture had peak incomes in 2014, with prices and incomes for animal products dropping since. Lower retail prices of animal products were the primary reason grocery store prices fell throughout 2016. The low farm incomes for animal agriculture in 2016 are expected to be similar in 2017.
Indiana farm families generally experienced financial erosion in 2015 and 2016. This was led by weak margins for crop production, declining values for land and machinery, and lower inventory values for grain and animals. The financial erosion is expected to continue in 2017, but the rate of erosion will be less severe as the sector makes more progress toward reducing costs.
U.S. yields of corn, soybeans and wheat all set new records in 2016. Indiana had record soybean and wheat yields, and corn yields were the second highest on record.
Prices will remain under pressure, but low prices are also stimulating strong consumption in both the export and domestic markets. However, consumption will be less than production and inventories of all three will grow. Indiana corn prices are expected to average about $3.40 a bushel in 2017, compared to $3.70 in 2016. Soybean prices will be slightly higher in 2017 at an estimated $9.30 per...