This is the second of a two-part article highlighting what happened agriculturally in 2013. This week we will focus on some highlights regarding input costs, grain prices and the overall farm economy for 2013.
Crop input costs in 2013 increased moderately, compared to 2012, with modest increases in expenses for seed and fertilizer costs; however, fertilizer costs are expected to be somewhat lower for the 2014 crop year. Corn drying costs in 2013 were higher that the previous two years, due to the lateness of the planting season in many areas. Land rental rates increased significantly in many areas in 2013, which followed rather large increases in the upper Midwest in 2012. Feed costs for livestock producers were quite high early in 2013, but moderated significantly in the last half of the year. Agriculture interest rates, both for operating loans and longer-term loans, remained quite low in 2013, with some modest increases in long-term real estate interest rates late in the year.
Local cash grain prices in southern Minnesota started 2013 near $7 per bushel for corn and $14 per bushel for soybeans. By year-end, the local cash grain prices have dropped to near $4.10 per bushel for corn and below $13 per bushel for soybeans. New-crop prices for fall 2014 at local grain markets are also near $4.10 for corn and close to $11.50 for soybeans. Breakeven grain prices in southern Minnesota for the 2014 crop year, based on average crop yields, input costs and land expense are expected to be near $4.50 for corn and over $11 for soybeans.
Many farm operators have stored a significant portion of their 2013 corn crop in on-farm storage, with much of that corn not being priced at the end of the year, thus resulting in more market risk into next year, as compared to recent years. A much larger percentage of the 2013 soybean crop was sold at harvest, or in the months since harvest, reflecting a fairly strong soybean market in the last half of the year, as compared to the 2014 soybean market prices. In the latest Supply and Demand Report released on Dec. 10, USDA is projected a national average corn price for the 2013 crop (from 9-01-13 to 8-31-14) of $4.40 per bushel. In that same report, USDA estimated a national average soybean price for 2013-14 at $12.50 per bushel.
The overall farm economy has remained quite strong in 2013 in the Upper Midwest, with some pockets struggling a bit more due to weather problems early in the growing season, and lower livestock profits in the first half of the year. Farm operators have made considerable capital investment into upgraded farm machinery, new technology, enhanced grain handling systems and improved tile drainage in recent years. These improvements have been aided by the extra farm profits from grain production and favorable depreciation measures for tax purposes, both of which are likely to change quite significantly for 2014. Land values continued to rise in many areas during the first half of 2013, though not at the rate of increase experienced in 2011 and 2012; however, land values in some regions has seemed to level-off or even drop slightly by year-end. Many analysts expect this trend to continue into 2014, especially if we experience lower grain prices during the coming year.