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Farm income up as commodity prices jump

Farmers across Iowa have been pretty pleased with their bank accounts in recent years.

Charles Brown, ISU Extension and Outreach Farm Management Specialist, said farm income has been good the past two years, but for different reasons in each year. In 2020, commodity prices were down but financial support from the federal government helped soften the blow.

In 2021, Brown said most of that government support went away, but luckily farmers didn’t need to rely on it because commodity prices jumped, close to all-time highs. The website macrotrends.net shows that the current price of corn is about $6 per bushel, and the price of soybeans a little over $13 per bushel.

“2020 would have been a tough year without those payments,” Brown said. “There were still some programs that went into 2021, and I don’t think any [funds] are expected in 2022.”

Brown said farm income was good in 2021 because exports picked up. China resumed purchasing corn and soybeans, and demand for ethanol was strong, too, which raised the demand for corn. Gasoline usage was down in 2020 because people stayed home due to the pandemic, and this hurt the ethanol industry and, in turn, the demand for corn. That trend reversed course in 2021 as more people took to the road.

China has become a major purchaser of American agricultural products. Brown said the country is trying to raise more livestock, but China can’t produce enough corn and soybeans domestically to feed the animals.

“There is good demand for corn and soybeans from China,” Brown said. “It’s a big country, but as far as crop production is concerned, only the eastern third of the country is used for that. They have a limited amount of land where the climate is decent for corn and soybeans. They have a lot of deserts and mountains.”

If you’re looking for the most productive farm ground in the world, look no further than the American Midwest. Brown said Iowa and Illinois are ideally suited to producing bountiful crops.

“There are other areas of the world, like Ukraine, which have excellent soil,” he said. “But while some of those European countries might have great soil, they lack the access to fertilizer or genetics that we have.”

Farm income has risen steadily over the years because yields inch up year after year. Brown said Iowa had a record corn and soybean yields this past year, about 200 bushels per acre for corn and in the mid-60s for soybeans.

“We had some exceptional yields, and it’s all about the timeliness of the rain,” Brown said. “It came at the right time across the state.”

Brown said the corn futures market is in an unusual place with regard to other purchasers of corn. The futures market normally runs about 40 centers per bushel higher than what corn processors offer, but right now that’s flipped and it’s the corn processors who are offering 40 cents more than the futures market. Brown said this reflects the high demand for corn right now at ethanol plants and at processing facilities that make corn into corn syrup and many other products.

“If you walk down the grocery isle, a lot of the products you’ll see contain corn,” he said. “Even some plastics have corn in them.”

While farmers surely enjoyed the jump in commodity prices this past year, they were less thrilled with the spike in their input costs. Brown said anhydrous fertilizer is three times more expensive than it was just a year ago. Phosphate and potash are twice as expensive as they were last year. Chemical costs are up 15-20 percent.

“The price of farm machinery is going up, too,” Brown said. “Today, a piece of used farm machinery costs more than a new one did 10-15 years ago.”

The price of farmland has increased 29 percent since the beginning of 2021, which is great for property owners who are renting their land, but at the same time it means that it’s harder for new farmers to break into the industry.

Supply-chain disruptions have caused some farmers to travel a few hundred miles to pick up a part because they couldn’t find it locally.

“The new technology with all the computer chips has been hurt the worst because most chips are made in China, and China wasn’t shipping them out,” Brown said. “It makes you realize that some of that older technology wasn’t so bad because you didn’t have to worry about computer chips.”

After a sluggish 2020, commodity prices recovered in 2021 and led to corn selling at about $6 per bushel. (Cliff Jette/The Gazette)
Timely rains helped farmers post good yields and good incomes in 2021. (Amy Mayer/Harvest Public Media)

Call Andy Hallman at 641-575-0135 or email him at andy.hallman@southeastiowaunion.com

Corn is not staying in the grain bins long as demand for it has picked up from ethanol plants and food processors. (Stephen Mally/The Gazette)
Charles Brown Iowa State University Farm Management Specialist