Farmers Could Face Economic Challenges in 2024

October 23, 2023



It has become somewhat easy to overlook farm profitability concerns for crop production in the Upper Midwest following three years in a row of strong profit levels (2020-2022); however, there are signs that point to more challenging farm profit scenarios in the future. As we enter the final months of 2023, there are indicators that average farm profit levels for 2023 will decline and even become negative for some farm operators. As we end 2023 and look ahead to 2024, farmers are facing the prospects of much lower commodity prices, along with reduced crop yields in 2023 due to drought conditions that existed in some areas.

Earlier this year, the University of Minnesota recently reported that the median net farm income for Southern Minnesota farmers in 2022 was $177,614, which was among the highest on record. This followed median average farm income levels of $176,426 in 2021 and $102,248 in 2020. The very positive net farm income levels from 2020-2022 followed seven years (2013-2019) in a row of sup-par net farm income levels in the region. The recent strong net farm income levels were enhanced by robust crop profits that resulted from average to above-average  crop prices and moderate crop expenses from 2020 to 2022.

Almost every crop input expense is higher in 2023 compared to expense levels in 2022 and other recent years. Much of the focus was on higher fertilizer costs for corn; however, input costs have also increased for seed, crop chemicals, diesel fuel, repairs, custom work, and labor. Interest expense, machinery depreciation and other overhead costs have also increased in 2023 compared to recent years. In most areas, land rental costs in 2023were also 10-25 percent higher than a couple of years ago.

Many types of fertilizer products reached record price levels in 2022 and did not decline significantly until after January 1, 2023. As a result, most crop producers had already locked-in their fertilizer costs for 2023 prior to the price decline, which is likely to have a big impact on corn breakeven levels for 2023. Fertilizer expense had typically accounted for about one-third of a corn farmers crop input costs (2013-2021); however, in 2022 and 2023 the fertilizer cost has risen to nearly 40 percent of total input costs for typical crop operations in the Upper Midwest. The good news is that the decline fertilizer prices this year should help lower fertilizer expenses by 30 to 40 percent for 2024 and help bring the ratio closer to long-term averages again.

Swine and dairy producers have already felt the financial pinch in 2023. Many hog producers have been losing $20 to $40 per head on every pig marketed during much of 2023. Obviously, some farmers can only withstand those types of losses for a given time before they need to make some decisions regarding their future in hog production. Milk prices at the farm-level in recent months have been $13 to $16 per cwt., when most family dairy farm operations need $18 to $20 per cwt. or more to breakeven. At the farm level, the negative profit margins for livestock producers have been driven by low market prices, high input costs for feed, supplies, and labor, rapidly rising interest rates.

An analysis of actual data from the SCC Farm Business Management program and the University of Minnesota FINBIN program on cash rented corn acres in Southern and Western Minnesota (2013-2022) shows some interesting trends on profitability levels for corn production in recent years. The analysis takes the average corn direct input costs, cash rent costs, and overhead expenses and divides those expenses by the average corn selling price for the year to arrive at how many bushels of corn it took to cover the various expenses, as well as the bushels need to cover all expenses. The net return over all costs would be the farm operator’s “net return to labor and management”. The analysis did not include crop insurance or government farm program payment income into the “bushels needed” calculations; however, that data is included in the “net return over all costs” figure.

Based on the FBM data, there was a negative “net return” over all expenses for corn production each year from 2013-2018, with less bushels produced than were needed to cover all crop expenses in some years. From 2020 to 2022, corn producers in Southern Minnesota have benefitted from favorable corn yields and strong commodity prices, together with manageable expenses, to achieve some very solid profit levels. An analysis of estimates for the 2023 crop year shows that there will likely be higher input costs, increased land rental rates and higher overhead expenses. Based on an average corn price of $5.50 per bushel for the 2023 crop, it will take an estimated corn production level of 199 bushels per acre to cover all expenses. This increases to 231 bushels per acre at a corn price of $4.75 per bushel, which is near or above the farm-level price at many locations this Fall. By comparison, it took only 154 bushels of corn in 2022 and 149 bushels in 2021 to cover all expenses.

Obviously, there is a wide variation in breakeven costs among farm operators in a given year, depending on final average yield and the market price received, as well as the variation in crop input costs and land expense. Based on the Southern Minnesota FBM data for 2022, the average net return for corn production on cash rented farmland ranged from +$66.46 per acre on the 20 percent low profit farms to +$581.77 per acre on the 20 percent high profit farms, compared to an overall average return of +$314.14 per acre on 925 farms. The lower profit farms did have lower average corn yield levels in 2022, which could have been weather related; however, these farms also had $66 per acre in higher crop input and land rent expenses, compared to the average farm.

The combination of significantly higher crop input costs and land rental rates is likely to put more pressure on crop breakeven prices for 2023. Using typical crop input expenses and average overhead expenses, together with a land rental rate of $275 per acre and a targeted return to the farm operator of $50 per acre, the breakeven price to cover those expenses for corn in 2023 for most producers will likely be approximately $5.25-$5.75 per bushel at average yield levels. If the cash rental rate increases to $325 per acre, the breakeven price is likely to jump to nearly $6.00 per bushel. The estimated 2023 breakeven soybean price for most producers to cover the cost of production in will likely be in the $12.00 to $13.00 per bushel range at average yield levels.

Based on the monthly World Supply and Demand (WASDE) Report in October, USDA is estimating the U.S. average corn price for the 2023-24 marketing year (2023 crop) at $4.95 per bushel and the average 2023-24 soybean price at $12.90 per bushel. Local cash price bids for corn in late September of 2023 at grain elevators and ethanol plants in the Upper Midwest were near $4.40-$4.75 per bushel. Local cash price bids for soybeans ranged from $12.25 to $12.75 per bushel, with slightly higher bids at soybean processing plants.

Many farm operators were quite optimistic about crop prices going into 2023 and did not “lock-in” a market price on a significant amount of their anticipated 2023 corn and soybean production. The best opportunities to forward price 2023 corn and soybeans were a few brief stints above $5.00 per bushel for corn and above $13.00 per bushel for soybeans this past Summer. Crop prices on the Chicago Board of Trade (CBOT) have been quite volatile during much of the 2023 growing season, due to concern over drought conditions in the U.S., changing weather patterns, variable crop yield projections, and changing political situations in the world. Farm operators that carried 80 to 90 percent crop insurance coverage on their 2023 corn and soybean crop could see some financial relief through crop insurance indemnity payments if they experienced reduced crop yields in 2023.

If the lower corn and soybean prices continue into 2024, it may become an even bigger financial concern going forward. While fertilizer costs have modified a bit in the past year, input costs for seed, chemicals, fuel, repairs, and labor have continued to increase. In addition, short-term interest rates on farm operating lines of credit have doubled in the past year, and credit needs will likely increase to finance the 2024 crop inputs. If corn and soybean grain futures prices for the Fall of 2024 stay low in early 2024, crop insurance guarantees for the 2024 crop year will be much lower than in 2023. This will increase the financial risk for many farmers going forward.


Note — For additional information contact Kent Thiesse, Farm Management Analyst and Sr. Vice President,

MinnStar Bank, Lake Crystal, MN.  (Phone — (507) 381-7960)

E-mail —  Web Site —


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