Historic perspective of crop prices

EAST PEORIA, Ill. — The ebb and flow of crop prices creates a never-ending challenge for farmers’ financial positions.

Nick Paulson, Gardner Hinderliter professor at the University of Illinois College of Agricultural, Consumer and Environmental Sciences, gave a historical perspective of the price swings.

“Yields are kind of the bright spots when it comes to farm income, particularly in Illinois. We have had a really good 10-year run of yields in Illinois for corn and soybeans,” said Paulson at a recent Farm Economics Summit.

“I say that because we have consistently, with the exception of 2019, been above trend yield since the 2012 drought. We’ve got a string of nine out of 10 years where corn and soybean yields have been above the level we would expect in a year with normal growing conditions.

“In some of the lower income years we had from 2013-2014 through 2019, those extra bushels were obviously helpful, as they were helpful in 2021 and 2022 in some of those high income years.

“This is not necessarily the story nationally over that same time period. We’ve actually had some relatively disappointing national corn yield.

“We may have had some record crops in some of those years, but from the yield perspective nationally it was maybe right at or slightly below trend yield, but here in the Midwest, in Illinois, we’ve had a really positive yield experience.”

An optimist would say that upward yield trend will continue in 2025 to offset the lower prices and high costs. The pessimist would say farmers are due for a bad year from a yield and income standpoint.

“I don’t think either one you can say has better odds than the other. That isn’t to say this pattern will continue or we’re due for a bad year. It’s just pointing out the fact that we have had a really good decade-long run above expected corn and soybean yields in Illinois in general,” Paulson said.

“Obviously, individual farm situations in pockets of the state can vary from year to year, but on average the yield side of the story has been overall very positive.”

Historical Perspective

The most recent price peak was during an 18-month period from August 2020 into 2022, “where the best time to sell corn and soybeans was ‘tomorrow’ consistently for about a year and a half,” Paulson said.

“We are now in two years of the opposite situation. The last two years, the best time to sell corn or soybeans basically would have been ‘yesterday.’”

The national average soybean price in the current marketing year is projected at $10.20 per bushel, with corn at $4 and wheat at $5.60.

“The bad news about this is while these prices are not low historically, we are back to where we were going into the 2020 through 2022 rallies. We’re basically back on the price side to where we were in that 2019 and early 2020 period,” Paulson said.

“The price levels that we’re currently at are not low relative to where we think that long-term average price is, the plateau we’ve been at since the ethanol build period started in the mid-2000s.”

The long-term average soybean price from 2006 to 2024 is $10.63 per bushel and corn is $4.38.

“We’re a little bit below that now, but we’ve been above it for multiple years in the last 20 and we’ve been below that long-term average for a multiyear run in the last 20 years, as well. So, we shouldn’t necessarily expect that prices are automatically going to somehow magically rebound to that $6 and $14 range for corn and soybeans,” Paulson said.

Production Costs

Over the past 25 years, production costs have gone up faster than incomes when there were higher incomes and higher prices due to the ethanol build period.

“They plateaued and came down a bit during the lower price, lower income period from 2014 to 2019, and then we saw the very quick, even bigger adjustments than we’ve seen historically year-over-year for costs in 2021, 2022 and 2023 crop years with those higher we saw coming out of the pandemic,” Paulson said.

According to Farm Business Farm Management data, non-land costs reached almost $700 per acre in central Illinois in 2023 and $1,052 per acre when adding an average cash-rent level in a 50-50 corn-soybean rotation.

The U of I ag economists projected costs to go down slightly in 2024 from a peak of $1,001 per acre in 2023 and potentially another $40 or $50 per acre drop in production costs for 2025.

“That first drop from 2023 to 2024 was almost entirely driven by lower fertilizer prices relative to where we were at in the 2022-2023 pricing period,” Paulson said. “There are lower fuel costs, too, that are very much tied to energy markets.

“The decline from 2024 to 2025 that we’re projecting is a combination of continued lower fertilizer prizes relative to the 2022, 2023 peak.

“We are also budgeting in for 2025 a slight downward adjustment in some of the cash-rent levels that we’re looking at regionally across Illinois. Maybe we’re being optimistic, but a $15 to $20 per acre reduction in cash rents is built into that drop in 2025.

“Unfortunately, with those adjustments down, we’re not back to costs pre-2020. We’re still above those levels, but prices are back down to prices we saw heading into 2020.

“We were in a low profit period then, and we’re in a lower profit period now, because we have prices back to those levels, but costs haven’t adjusted back down to those levels yet and I don’t know if we should expect that, too.”

This translates to a break-even for central Illinois for covering non-land costs if a farmer owns their own land of $3.20 per bushel for corn and $6.55 for soybeans.

In a typical cash-rent scenario for central Illinois, the break-even costs for 2025 are $4.60 for corn and $11.05 for soybeans.

The break-even for those in northern Illinois who own the land is $3.30 for corn and $6.75 per bushel for soybeans, while the break-even in a cash-rent scenario are estimated at $4.60 for corn and $11 for soybeans.

For southern Illinois, the break-even estimate for owned land is $3.65 and $8.35 per bushel, and cash-rented land break-even is $4.64 and $11.55 per bushel.

Cash Rents

Cash rents have more than doubled in the last 20 years and are up 20% since 2021.

Paulson presented net returns on cash-rented land in a 50-50 corn-soybean rotation for central Illinois.

“We had negative returns in 2014 and 2015. Returns for 2023 were negative $93 per acre. The 2025 projection is slightly below that,” he said.

The average farmer return over the last 23 years was $103 per acre in a rotational system in central Illinois on cash-rented farmland.

The southern Illinois average return was $80 per acre, and it was $90 per acre in northern Illinois over 23 years on cash-rented farmland.

“There were some years that were well above that, but also plenty of years that were below that,” Paulson said.