Farmers Urged to Plan for Volatility in 2023

Listen to KC Sheperd and Matt Erickson talk about an economic outlook for producers in 2023.

At the National Association of Farm Broadcasters in Kansas City, Farm Director, KC Sheperd, had the chance to visit with Ag Economic and Policy Advisor at Farm Credit Services of America, Matt Erickson, about an outlook for 2023 as many factors continue to impact the markets.

“We have had quite a 2022 year,” Erickson said. “Farmers have been through black swan events, drought in South America, even drought here in the U.S.”

Specifically for corn and soybeans, Erickson said everyone he has seen or heard has had a safe and relatively successful harvest, but there is a tight supply situation.

Looking at the corn crop, Erickson said the stock-to-use ratio was at about 8.3 percent, and soybeans were at about 5 percent, which is both under the ten-year average.

“When we enter into 2023, planning for volatility is going to be really important,” Erickson said.

Regarding issues with the Mississippi River drying up, Erickson said problems with waterways or any mode of transportation is always concerning.

“We have always been relatively dry in the fall months, but nothing like this,” Erickson said. “I think that is something to keep an eye on. I know parts of the Midwest have gotten some rains that have increased the Mississippi River a little bit but not to the point where it is back up to normal by any stretch of the imagination.”

Erickson said farmland values are strong and have been increasing.

“Strong profitability since, really after the 2020 harvest as well as buyer demand have really driven up farmland values,” Erickson said. “Commodity prices have been relatively strong. That has also been increasing farmland values as well.”

Looking at the 2023 farm bill, Erickson said it is important to give the committees a chance to work and understand what has worked well, and what can be improved from the 2018 farm bill.

“When I look back at my time on the Senate Ag Committee, what is so hard about writing a farm bill is it is not about looking at what is going to happen in 2023 when you write it,” Erickson said. “It is about the next 5 years and what economic conditions are going to look like.”

From talking with producers, Erickson said he knows they want predictability and certainty with regard to making sure that the 2023 farm bill gets finished.

“We are pushing for that as well,” Erickson said. “We want to make sure producers have the certainty and predictability for those risk management programs.”

The 2023 year is expected to be profitable, Erickson said, but there is a tremendous amount of risk.

“When we enter 2023, it is so important for us to preserve our working capital and not to pay off that low-fixed debt that you have had,” Erickson said. “The second thing is really understanding your cost and revenue structure within your budgets. With a volatile year likely in 2023, that is so important.”

The best way for producers to better manage volatility going forward, Erickson said, is learning to understand their numbers and margins.