CHAMPAIGN, Ill. — About one year ago, University of Illinois agricultural economist Todd Hubbs predicted the price of corn for 2018 to be $3.30 per bushel.
He was pretty close. The year’s average price was $3.36.
The good news is that he’s expecting a slightly higher price for 2019. The bad news: not much higher.
Hubbs told those attending the 2018 Farm Economics Summit in Champaign Dec. 21 that he is forecasting $3.70/bushel average for corn this year. He notes that his prediction is a little higher than the $3.60 the USDA is forecasting.
“I think it could be $4,” he said up the upward possibility. “Through the marketing year, I think we will get strength in basis.”
All things considered — especially exports — Hubbs said he believes the price of corn should really be about 25 cents higher than it is.
His predictions for soybean prices in 2019 aren’t so optimistic considering the trade war with China, other global trade uncertainties and a large carryover. Soybeans averaged $9.20 in 2018, but next year he expects an average of $8.50.
Hubbs and fellow University of Illinois ag economist Gary Schnitkey encouraged farmers to lock in beans at $9 per bushel if they see that price for 2019.
“A considerable amount of uncertainty remains due to trade issues with China and South American crop prospects in 2019. We are going to be in a dog fight for the soybean export market in 2019,” Hubbs said.
He doesn’t expect livestock prices to make many big gains in 2019 either. U.S. beef production is expected to increase 3.3 percent this year. Fed cattle prices averaged near $117 in 2018, and look to average $118 in 2019, Hubbs said. Feeder steer prices averaged $148 in 2018 and his current projections place 2019 prices slightly lower at $145.
With uncertainty in exports, Hubbs predicts an average pork price to be $42 this year, down from $45.50 in 2018.
“Stronger prices remain a possibility if demand from China materializes,” according to Hubbs’ analysis.
His predictions are rosier than Schnitkey’s, whose projections for farm income in 2019 are sobering. Comparatively, 2018 was a good year for many farmers — with good yields, many locked in some profitable prices early in the year and got the benefit of the Market Facilitation Program for trade hardships.
“Grain farm income in 2018 is expected to be higher than 2017,” Schnitkey said. “We are thinking incomes will be relatively good in 2018.”
For 2019, it will likely be difficult to lock in prices as high as 2018; yields may not be as high, and the government has said that even if trade issues continue, there will be no additional government payments this year.
In 2018, if farmers locked in good soybean prices and received MFP payments, some earned about $10.20 per bushel. That, combined with a good yield, made it a profitable year for many.
Yields will likewise have an impact on profitability in 2019.
“Since 2012, we’ve been above average trend-yield predictions,” Schnitkey said.
On average, yields have been 6.8 bu./acre above trend yields. In 2018, Illinois corn producers across the state yielded 210 bu./acre state average.
With increased input costs, including a likely hike in anhydrous costs this spring, income projections for 2019 are bad news, he said. At trend yields, the projection of average farm income is a loss of $60,000.
“It’s the worst incomes since we have records,” said Schnitkey, indicated records started in the 1960s.
If farmers get above-average yields, like in 2016 to 2018, the income projection would be a loss of $3,000, he said.
This year could be a break-even or profitable year if one of three scenarios takes place, he said:
- If there are above-average trend yields with $4 corn and $9.50 beans;
- or above-trend yields and continued Market Facilitation Program payments
- or a drought (outside Illinois) bringing $5 corn and $10 soybeans, he said.
“2019 could be very bad — but hopefully not,” he said.
To be prepared, Schnitkey suggests building up working capital from 2018 profits ($300 per acre if possible); foregoing capital investments, including equipment; and working on tax planning. He also recommends locking in prices at $9 for soybeans if possible for at least part of a crop.
For rental land, “talk to landowners,” he said. “Cash rent has come down a bit, but it has not come down enough.”
Acknowledging his outlook is dreary, he tried to provide some optimism.
“This is agriculture and something good could happen, but still look at 2019 as a challenge,” he said.