Tight Budgets Likely to Persist in 2017

by Brent Gloy and David Widmar

(Brent and David originally wrote this piece for the Fall issue of The Feed, available here).

With planning for 2017 underway, many are finding the tight budget environment is likely to persist in 2017.  When evaluating the major row crops and major growing regions of the country, our crop budget estimates suggest that 2017 will be another challenging year for row crop producers.

While there has been a significant amount of negative news about the 2016 economic situation, there were some positives.  Perhaps the most important of these is costs of production declines.  This year saw some reductions in fertilizer and fuel prices, as well as, cash rents.  Unfortunately, higher crop prices and additional cost reductions will likely be necessary to restore profitability in 2017. Continue reading

Early Signs of Farm Fixed Expenses Falling

4618668856_9ddf2b5be0_m by David A. Widmar

As we’ve pointed out in previous posts (most notably here), a return to profitability for producers in light of lower commodity prices will require a combination of three scenarios: 1) variable costs moderate through eventual reduction in farmer demand for inputs 2) fixed costs decline through reduction in fixed asset demand and values, and/or 3) output prices may improve. About a year ago we noted that fixed expenses were still increasing, but at much slower rate. This week we take an updated look at fixed expenses to evaluate if producers have adjusted their cost structure lower. Continue reading