This is the second of a two-part article highlighting what happened agriculturally in 2014. Last week’s article provided a review of 2014 crop production and weather conditions. This week we will focus on some highlights regarding input costs, grain prices and the overall farm economy for 2014.
Crop input costs in 2014 were nearly the same as 2013, with modest increases in seed and crop chemical costs, and slightly lower fertilizer and fuel costs. Crop input costs are expected to remain fairly steady in 2015. Corn drying costs in 2014 were higher than in recent years, due to the lateness of the planting season in many areas. Land rental rates in most areas of the Upper Midwest stayed at fairly high levels in 2014; however, average land rental rates may adjust slightly lower in some portions of the region for 2015. Feed costs for livestock producers moderated significantly in 2014, as compared to the first half of 2013. Agriculture interest rates, both for operating loans and longer term loans, remained quite low in 2014, which is a trend that is likely to continue into 2015.
Local cash grain prices in southern Minnesota started 2014 just above $4.00 per bushel for corn and near $13.00 per bushel for soybeans. Local cash prices dropped to below $3.00 per bushel for corn, and below $9.50 per bushel for soybeans, by late-September; however, the grain prices have rebounded to near $3.90 per bushel for corn and $10.00 per bushel for soybeans by mid-December. New crop prices for fall 2015 at local grain markets are near $3.80 per bushel for corn and close to $9.75 per bushel for soybeans. Breakeven grain prices in southern Minnesota for the 2015 crop year, based on average crop yields, input costs, and land expense are expected to be near $4.50 per bushel for corn and over $10.50 per bushel for soybeans.
Many farm operators have stored a significant portion of their 2014 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 2014 soybean crop has been sold at this point, reflecting a fairly strong cash soybean market in recent weeks. In the latest Supply and Demand Report released on December 10, USDA is projected a national average corn price for the 2014 crop (from 9-01-14 to 8-31-15) of $3.50 per bushel, and a 12-month national average soybean price for 2014-15 of $10.00 per bushel.
The overall farm economy has remained fairly strong in 2014 in most of the Upper Midwest, especially in areas with a significant amount of livestock production. In areas that struggled with weather problems in 2014, which resulted in lower-than-average corn and soybean yields, the farm financial picture at year-end is far less favorable. Capital investment into upgraded farm machinery and facilities slowed in 2014, as profitability on grain farms declined significantly in most areas. Land values started to decline in many areas during 2014, with more significant reductions in the last half of the year.
According to the annual Iowa State University Land Value Survey on November 1, 2014, average values of tillable farm land in most counties in north-central and northwest Iowa declined by 11-15%, compared to land values at the end of 2013. Many analysts expect this trend to continue into 2015, especially if the lower grain prices continue during the coming year.