Corn and soybean growers in the Midwest face nearly $480 an acre in fixed costs and land rent going into the planting season, and hundreds of dollars more in per-acre expenses for the so-called variable costs of producing a crop, says economist Brent Gloy. The total is well above the amount that farmers can guarantee if they buy a crop insurance policy that covers 80 percent of average revenue from corn and soybeans, the two most widely grown crops in the country.
“First, insurance guarantees will not come anywhere close to covering the total costs of production on most farms,” writes Gloy at the blog Agricultural Economic Insights. “Second, unless prices rise considerably, they will not cover the cash rent on most farms. This means that most farmers will have to see some revenue improvement to cover total costs.”
Crop insurance guarantees declined sharply in 2014 and 2015, reflecting the drop in commodity prices. Gloy said his estimates of insurance guarantees for corn and soybeans this year “do not suggest a large shift in acres from last year.” The USDA has projected a 2-percent increase in corn plantings and a 1-percent decline in soybean plantings, based on November conditions.
The USDA is scheduled to release today its first forecast of farm income for 2016.