Loan rates, commodity prices may reduce ‘24 farm incomes
STARKVILLE, Miss. -- Producers should anticipate tighter profit margins in 2024 as agricultural commodity prices decrease and financing costs climb. However, experts expect the industry to be buoyed by its economic strength, which has grown 6% since 2021.
This was one of several takeaways offered by Nathan Kauffman, senior vice president of Kansas City Fed Omaha Branch, during his keynote presentation at the 2024 Mississippi Agricultural Outlook Conference Jan. 11. He is the Kansas City Fed’s principal agricultural economy expert.
“You saw agricultural prices increase sharply in 2020 and through 2021 and 2022. 2022 turned out to be an exceptional year in farm income,” Kauffman said. “You might see some places that describe this as a pretty significant decline in 2023, but it’s coming off an exceptional level.
“It wasn’t just (COVID-19 relief program) government payments in 2020 and 2021,” he added. “It was outright profits that were because commodity prices were accelerating more rapidly than costs.”
Specialists in economics and agriculture from the Mississippi State University Extension Service and MSU Department of Agricultural Economics shared updates and forecasts in the state’s agricultural industry for 2024 during the conference at the Bost Conference Center at MSU.
Kauffman said the financial picture for agriculture nationally still looks strong despite expense increases across the board, from interest rates to feed and fertilizer.
“We are looking at the potential for slower economic growth, not just in the U.S., but globally,” he said. “I think 2025 and further on will reflect something similar, with the European Union, China, Japan, Mexico and all major trading partners also looking at slower growth.”
Kevin Kim, assistant professor of agricultural economics at MSU and host of the event, forecasted a modest increase in Mississippi farmland value for 2024 driven by high demand, low supply and possibly lowered interest rates charged from lenders.
“Many investors are looking into the southern region because the increase in the farmland value was not as great as the Midwest region, so they are seeing more opportunities,” Kim said. “In the last three years, farmland values jumped 30 to 40% in Indiana, Illinois and Iowa. During that same period, cropland in Arkansas, Louisiana and Mississippi only increased 10%.”
The conference also featured updates from MSU Extension on the outlook of row crops, livestock, crop production cost estimates and labor for 2024. Highlights from the presentations included:
Row crops -- MSU Extension row crop economist Will Maples covered the updated reference prices in the farm bill-based Price Loss Coverage program. PLC payments are issued to participating growers when market year commodity price averages fall below the PLC reference price for corn, soybeans, wheat and cotton. The reference price for corn rose from $3.70 per bushel in 2023 to just over $4, and the price for soybeans rose from $8.40 to $9.26. Prices for wheat and cotton remained at $5.50 per bushel and 37 cents per pound, respectively.
Livestock -- MSU Extension livestock economist Josh Maples discussed U.S. meat and poultry consumption and prices and their impacts on producers and consumers in Mississippi. He noted the improving price environment for cattle producers as cattle supplies have tightened in recent years. Poultry demand remains strong, but broiler prices have fallen from the record high levels seen in 2021-22.
Crop production costs -- MSU Extension agricultural economist Brian Mills presented production cost estimates in 2024 for cotton, corn and soybeans. These budgets are developed by a multidisciplinary team at MSU based on common production practices and cost survey data from agricultural suppliers. The report projected corn producers would need to receive just over $5 per bushel to break even, based on a yield of 220 bushels per acre. The breakeven price for cotton growers will be around 87 cents per pound, Mills said.
Labor -- MSU Extension agricultural economist Elizabeth Canales discussed the growing number of certified positions across Mississippi in the H-2A program, which allows growers with domestic worker shortages to fill gaps with workers from other countries. The number of those positions in the state rose nearly 10% each year from 2,762 in 2013 to 6,875 a decade later. She cited the increasing demand for skilled farm workers as technology’s role in production grows.