Budgets likely to remain tight for next couple years

Already dealing with down markets, farmers have more tight financial times ahead of them.

That’s according to Jack Davis, South Dakota State University Extension Service field specialist.

Davis gave a presentation about crop production and income trends to farmers Wednesday afternoon at the AmericInn.

The main takeaway was that ag producers will have to prepare to keep their budgets tight for the next two years or so. Then, things should start to get better.

“I really wanted to drill in that it’s probably going to still be tight for a couple more years. Producers need to really try to manage those top costs very closely and try to reduce them 5 to 10 percent without cutting the yield,” Davis said after his talk.

“Gross (crop revenues) are down about 50 percent from peak. The expense side of that is only down about a third from peak, so it’s very tight margins for many producers. Things have to work really well, and they’re going to have to keep working on reducing expenses (to be profitable). Some of that came off easily to start with, but now it’s getting tougher to negotiate those things down,” Davis said.

Prices for the region’s most popular crops — corn and soybeans — were at record levels just a few years ago. Now, they are so low that many farmers are struggling.

Some expenses have adjusted to the decreasing crop prices better than others, Davis said.

“Fertilizer has adjusted very well. It’s still kind of steady, and if crop prices don’t rebound much, fertilizer prices will still have to get lower. Seed has not adjusted very much, but it also offers technologies and higher-yield enhancing type things,” he said.

Farmers have to decide whether paying more for those hybrids is worthwhile.

Land costs are down a bit, he said, but there’s still probably some room for farmers to negotiate.

Davis said producers will have to spend more time managing their expenses to ensure they remain on top of them.

“Agriculture is still more positive long term as the world population grows and incomes grow,” he said. “But this might be a long reset as we get adjusted here.”

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