By TIM ALEXANDER Illinois Correspondent EAST PEORIA, Ill. — The overarching theme from a morning full of seminars geared toward farm profitability in 2018 was perhaps best summed up by Illinois Farm Business Farm Management (FBFM) CEO Dwight D. Raab, who said profitability, while presenting a challenge, will not be impossible. “Nothing is dismal,” he told the 175 or so farmers and others who gathered Dec. 19 for the University of Illinois 2017 Farm Economics Summit in East Peoria. Raab began his presentation with a projection of 2017 farm incomes, noting that though yields have been a pleasant surprise for many, incomes will remain down for most grain farms due to continued low commodity prices and decreasing ARC-CO payments. In fact, FBFM producers in Illinois should not expect payments from the Agricultural Risk Program at the county level in 2017, Raab said. As for 2018 projected incomes, reasonable expectations include continued low corn and soybean prices, with indications that soybeans will be the most profitable commodity to produce. With lower input costs for nitrogen and the expectation of lower land costs, higher accrual net farm incomes could follow, Raab predicted. This is despite the fact that low to no ARC-CO payments will not provide a cash flow boost in 2018. “I’m pretty sure I’m not telling you anything you don’t already know, but there is a lot of (income) volatility out there,” Raab said, while advising farmers that rebuilding and protecting working capital would be paramount in reacting to lower profitability. “Dealing with the underlying profitability problem is key to future financial success.” In addition to machinery costs and inputs, often a farm operation teeters on profitability because of family living expenses, an oft-overlooked component of farm solvency that can be addressed. In 2016, the farm share of family living and taxes amounted to a little less than $50 per acre, down from its peak of more than $70 in 2013 but still substantially higher than the mid-$30 level of 2006, according to FBFM records. “As a staff, we always have a talk with our FBFM members about family living expenses. We need to think about them in terms of what they cost us per acre on the farm, so that we can build them into your budget,” said Raab. “Since the 2006 ethanol mandate, we have had a little more money on the farm, and we have tended to spend more. Our total non-farm family living expenses for 2016 averaged a little over $80,000 ($82,260, according to FBFM records). You need to build that into your budget, so you can cover those things.” Growers who have the option of planting soybeans in 2018 should strongly consider the crop, he advised, noting that despite a robust corn yield for many in 2017, “price trumps bushels” and makes it difficult for corn revenue to be greater than land and non-land costs. The farm management advisor concluded by telling those at the Summit (which was over five days in five cities during the week before Christmas) that, fortunately, most Illinois grain farms are in good to strong financial position. This is due to good farm liquidity and strong median debt-to-asset ratios that have decreased in the past 10 years, allowing for the weathering of lower farm profitability. “Monitor your working capital closely. Look at your balance sheets and know what’s on them,” Raab explained. “We’ve been lucky. Some of the good yields have mitigated some of the decreases in working capital. “I don’t know that anything is dismal here, (but) I think you will all have a great task at hand to monitor the financial health of your farm and pay attention to what’s on your balance sheet. “I would very much advise you to put together a balance sheet if you do not already have one, and an accrual income statement, as well. You have to know what your accrual income statement is before you can really know how you did, and mark your progress at the end of the year,” he added. Illinois FBFM field staff across the state can assist growers in putting together balance sheets and accrual statements, added Raab, whose Summit presentation slides can be viewed online at www.farmdoc.illinois.edu/presentations/IFES_2017 |
