2017 Field Crop Margins Recovering in Europe but Difficult Times Continue in the US and Brazil

A new edition of the Rabobank Field Crop Margin Outlook with a forecast of field crop margins in 2017 was released this week. The conclusion is that field crop margins will not provide much support to farm inputs markets in 2017.

Report summary

US farmers will face another challenging year in 2017. Where wheat farmers in the Great Plains area saw a small improvement of margins in 2016, following an exceptionally good yield, the Midwest corn-soy farmers saw a continuation of margins too low to cover all costs not accounted for in our margin calculation, such as cost of machinery (e.g. interest costs).

Figure 1: Field crop margins in US Midwest

Figure 2: Field crop farmer margins in US Great Plains

In Brazil, a series of years with attractive margins also seems to be coming to an end, be it that 2017 is still okay. Moreover, the general economic situation with difficult access to credit is expected to continue in Brazil.

Figure 3: Field crop farmer margins in Brazil (Mato Grosso)

In Europe, France and Poland are expected to show a recovery in margins in 2017 after dipping in 2016. However, farmers will only experience this improvement once the cash of the new crop comes in, which means not before late 2017 at the earliest. In the Netherlands, farmers benefit from attractive potato prices, resulting in attractive margins in both 2016 and 2017.

Figure 4: Field crop farmer margins in France

Figure 5: Field crop farmer margins in Poland

Figure 6: Field crop farmer margins in the Netherlands

In Australia, in the absence of extreme weather events, margins—though declining—are expected at reasonable levels in both 2016 and 2017.

Figure 7: Field crop farmer margins in Australia (New South Wales)

Overall, the field crop margin outlook does not provide much support for farm inputs markets in 2017. The margin decline in 2016 in Europe comes on top of the prolonged decline in the US. And both in Brazil and in Australia, margins are under pressure too. The forecasted recovery in Europe in 2017 will not provide comfort before early 2018, when the cash of the new crop comes in.