CFAP, Higher Prices Improve Farm Income Outlook

Grain farm income is looking better for the year.  There are three reasons for corn and soybean farmers to be more optimistic about making some money this year. University of Illinois Extension agricultural economist Gary Schnitkey says it starts with yield.

“USDA  is projecting a 203 bushel-per-acre yield for corn in Illinois. It is the second highest yield ever. The highest yield happened in 2018. It was 210. So, we raise our corn yield to 230 in our central Illinois budgets and that was 237 in 2018. Similarly, soybeans are looking better and we put our yields for 2020 at 72 bushels to the acre for high-productivity land in central Illinois.”

Price times yield equals the gross income. Yields are expected to be very good in Illinois and price, while not great, is getting way better. Gary Schnitkey says he used USDA’s latest season’s average cash price in the updated budgets. USDA has the national cash price for corn at $3.50 and soybeans at $9.25.

“We typically see higher prices in Illinois than the U.S. average. So, we are now using $3.55 for corn and $9.30 for soybeans for 2020. That’s up considerably from a month ago and the derecho in Iowa and hot, dry weather contributed to that as well as continued strong export demand particularly to China.”

Government payments make up the final portion of the income picture. When all of the payments are added together it pushes gross corn income to $885 per acre and soybeans to $707. Schnitkey say round two of the Coronavirus Food Assistance Payments (CFAP) make a big difference. At $48 an acre for corn it pushes the budget from a loss for corn to a $39 an acre profit. The soybean profit is projected at $79 per acre of which $17 is attributable to CFAP.

“Incomes look better than they did earlier in the year. CFAP payments obviously are important but getting higher yields at the same time as higher prices than we thought we were going to have is going to make income look better this year than we thought in July.”

In July University of Illinois had projected farmers would lose $32 on every acre of corn produced on highly productive central Illinois farmland and make about $42 per acre on soybeans. The September budget update, the CFAP2 payment announced last week, has put both of those numbers in the black.