About 30% of Kansas farms had a negative farm income last year. That was according to Kansas State University Extension farm management specialist Gregg Ibendahl, who gave a webinar on Kansas farm incomes recently.
He estimated Kansas average net farm incomes for 2024 at $100,000 “or a touch lower.” Based on current crop prices, the next couple of years look “challenging” for farmers, he said.
He said up to 35% of farms could have a negative net farm income this year and next, a trend he called “worrisome.” The three most important factors driving net form incomes, he said, will be grain prices, weather and interest rates. Net farm income doesn’t include personal income.
Ibendahl’s estimate assumed normal yields for corn and soybeans. Wheat yields may be slightly lower than average this year, he said, as measured against the past 10 years.
The 30% negative farm income is a “high number,” he said, but noted that it includes “recreational” or part-time farmers, who could make up as much as 7% of farms. “Averaged over a 10-year period, most farms are doing OK,” he said, with the median income number at $75,000. Most farms had not more than two years of negative net farm income within the past 10 years.
Rising land values contributed to higher farm equity. While debt/asset ratios are strong, they are not a good indicator of profitability and serve as a lagging indicator. Most farms have been adding debt since the 1990s, with average farm debt standing at about $400 per acre. The top-earning 25% of farms, though, have zero debt.
Interest rates being paid by farmers are “relatively low,” Ibendahl said, although he noted an increase in the short-term rate over the past two years.
Diesel prices
Diesel prices have decoupled from gasoline prices in the past couple of years, he said. Gasoline and diesel both used to track oil prices in the same way. He attributed this decoupling to the fact that the diesel demand base is lower than that for gasoline.
Refineries will prioritize gasoline refining in times of peak demand like the summer driving season. The Ukraine “war premium” for oil has vanished as Ukraine is now targeting Russian oil production facilities with long-range weapons after getting permission from some of its allies and weapon suppliers to use them inside Russian territory. Russian production has not been too affected yet.
However, domestic refinery challenges are still a concern, he said, as they are operating close to capacity. Refineries are operating at a 90% efficiency rate—even those that are 50 or 60 years old. Refining capacity is not yet back to pre-COVID levels. But, he said, “We are one hurricane or fire away from a major price shock.”
Diesel stocks are low, near the bottom of the five-year average, while gasoline stocks are not quite as low. The price premium for diesel has varied from 10 cents to 90 cents for the past 12 months, with 50 cents the most recent premium. Ibendahl said it could go to 80 cents by the fall. His recommendation for farmers is, “Buy your diesel now! Don’t wait for the fall.”
Fertilizer
Fertilizer costs should be slightly lower in 2024, although anhydrous is still higher than average at about $700 per ton.
Russia is a major fertilizer exporter, exporting all three of the top fertilizers. Ibendahl sees a high correlation between overall inflation and fertilizer prices, and among all fertilizer prices. He didn’t foresee nitrogen fertilizer hitting more than $1,000 per ton. He said anhydrous prices may have bottomed out, but farmers could see $1,000 again if there is a Ukraine “jump-up.”
As always, he said, rainfall or its lack could change estimates.
David Murray can be reached at [email protected].
