Down the Homestretch of Another Eventful Year

October 31, 2023

What a year it has been! Sound familiar? In the fast-paced and eventful world we live in, it is becoming quite customary to feel a sense of wonderment when looking back on a year. As you read this, farmers are putting the finishing touches on a 2023 crop and everyone is turning their eyes toward 2024. Let’s take a quick assessment of where stand.

The crop could generally be described as “good” not “great”. Of course, looking back at what Mother Nature dealt us, no one was expecting a bin buster. Most of our area was extremely dry through June. Even when we did get precipitation, the rains were scattered and occasional. We also experienced many wind and hail events, resulting in several farms having more than one insurance claim. Fingers crossed that by the time this hits your mailbox, we haven’t been thrown another curveball. All that said, I have been pleasantly surprised at the resiliency of the crop and, all things considered, am satisfied by yield numbers coming in at the levels they have.

The commodity markets have been more of a bummer than yields. I will spare you the macro and micro economic details, but the grain prices have taken a lot of pressure this year. As I type, the average corn price is down about 30% from the same week in 2022. Beans are down around 8% from this same week in 2022. Volatility continues to be the name of the game when it comes to crop prices. A huge bright spot that has lessoned the sting of falling commodities is that fertilizer prices and input costs have slid even further. An enormous inflationary rise hit last off-season with anhydrous, dap and potash. The prepay level so far this year on anhydrous is over 50% lower than what we had to pay for the 2023 crop. Dap and potash are also down between 30-40%. This makes a huge difference for the early gross projections on the 2024 crop. We don’t expect to see a dip in seed or chemical prices.

As far as land values go, it would not be a “fish story” to call the 2021-2022 land market insane. During that time, the average price of tillable farmland in our area rose between 40-50%. Marginal and recreational land also experienced healthy jumps. Many (myself included) expected us to retrace some steps on values in 2023. Afterall, interest rates have more than doubled and grain prices are down. All of that to say, land prices have not begun to trickle down yet. At the Farm Progress Show in August, I reported that land sales from the first half of 2023 recorded little to no change in values across all classifications statewide. What we do see, however, is drastically fewer listings and auctions throughout the state. While prices remain at historic levels in some areas, the market certainly feels different. I don’t anticipate a sharp dive off a cliff, but I suspect that we will start to see a slight decrease in values in the months ahead.

In summation, 2023 has been an odd year on many fronts. Crazy weather, precarious commodities and sporadic transactions have given 2023 its own unique vibe. Though it can result in some stress, we are up for the challenges. I think it is what makes agriculture so fascinating. Some years are better than others and the difference between the two can be vast. The relationship between land and farmer in facing these challenges is always incredible to see. We are grateful for the role we play in working collaboratively together through these yearly ebbs and flows.

Written by Luke Worrell, Managing Broker, AFM, ALC