By Vance Ehmke
For Christmas….
Kansas Farmers Got Lump of Coal
After a weak financial year in 2023, many Kansas farmers dreaded meeting with their accountants and tax preparers as they looked at how they did in 2024. Their concerns were justified.
Accountant Rohn Shellenberger, Scott City KS said he was “alarmed” to see inventories and incomes drop anywhere from 20 to 50% with his farmer clientele. “Across the board, the declines probably average 20 to 30%.”
What Shellenberger is seeing is significant because he prides himself on dealing with some of the larger and better farmers in the area. But nevertheless, those farmers are finding they’re not immune to high interest costs, low commodity prices and high input prices.
Further, he says the outlook for 2025 is not much better. “The emergency payments authorized by Congress in late December will certainly help, but we shouldn’t count on that being our savior. While we do have some things going for us in very good wheat stands and great moisture, with our costs as high as they are, we’ll need 70-bushel wheat just to breakeven.”
The accountant is not far off the mark. KSU ag economist Dan O’Brien, Colby, says with 54-bushel wheat yields, we need a wheat price of $7.18 to cover all costs—and that’s practically $2.50/bushel over current market prices. “In short, our current situation is a recipe for disaster.”
O’Brien says if you’re lucky enough to grow 62-bushel wheat, you still need $6.46 to cover all costs. Only after subtracting off certain costs like depreciation will you need a price of $4.15 to cover your direct or out-of-pocket costs. “Still, you can’t ignore those costs forever—ultimately they have to be covered.”
Iowa State University ag economist Chad Hart says farm incomes started going down two years ago and are now starting to impact land prices. “One of the things helping support land prices is that there’s not a lot of land on the market.
“Over the last 20 years we’ve had incredibly low interest rates. But today’s high interest rates have definitely hurt the land market. Because of these and other costs, the income from land has gone down. It’s hard to make current land prices work.”
From an economics point of view, Hart says what we don’t want to hear: We need these low incomes in order to pull down our costs. If we don’t have the income to buy land or bid on cash rents or to buy equipment, those costs drop.
While 2024 is going to be a humbling experience for a lot of farmers, 2023 was, too. KSU’s Farm Management Association said in ’23 that 30% of their farmers had negative incomes. Kellen Liebsch, KFMA, says their figures for ’24 won’t be out until May. “However, I agree we are seeing declines especially when compared to ’22.
“And while the emergency farm payments just authorized by Congress will help with cash flow, it’s hard to think this will replace all of the shortfall from a revenue perspective,” she says.
Looking forward, the picture is not promising. CoBank ag economists are expecting record soybean and corn crops in Brazil which will put severe pressure in US bean prices. And with a dismal bean price, US farmers will plant more corn leading to low corn prices.
They also point out that oddly enough, we have tight global corn and wheat stocks but the ultra-strong US dollar results in very low commodity prices to American farmers. Adding further concern to the market are the incoming administration’s talk about putting tariffs on such countries as China, Mexico and Canada—three of the top markets for US ag products. That likely will lead to retaliatory actions—and even lower commodity prices.
So what does all this mean? Looks like it’s time to buckle up your seat belt…and snug it up real good. This year could be a rough one.