2011 Ag Review: Crop Production, Prices, Inputs and Livestock

2011 Ag Review: Crop Production, Prices, Inputs and Livestock

 

The end of the year is a good time to reflect on what happened agriculturally in the region in 2011. Here are some highlights regarding crop production, grain prices, crop input costs and livestock profits during 2011.

 

Crop Production

This past year will be remembered as a crop year with weather extremes and highly variable crop conditions in many areas of Minnesota. The year started with later-than-normal corn planting in most of the state, with little or no corn planted in April in many areas. Cooler-than-normal temperatures and above normal rainfall existed during the early portions of the growing season. The last half of the growing season saw above-normal temperatures, and way below-normal precipitation levels in most areas. The very warm, dry weather pattern lead to rapid development, maturity and drydown of the 2011 corn [2] and soybean [3] crop. Many areas of southern and western Minnesota were impacted by the early killing frost that occurred on Sept. 15.

In most areas of southern Minnesota, the 2011 harvest was highly variable, mainly due to the erratic weather conditions during the growing season. Whole-field corn yields generally ranged from 140-180 bu./acre, while whole-field soybean yields were mostly in a range from 35 to 50 bu./acre, with large variations occurring sometimes on the same farm or in the same township. Some whole-field yield levels were even lower in areas that were hard-hit by late spring planting, severe storms, the very dry late-season weather pattern or the September frost. Some higher yields existed in southeast Minnesota, which had a bit more favorable growing conditions late in the growing season.

The good news with the 2011 corn harvest [4] was the dryness of the corn and the quality of the corn at harvest. Most of the corn harvested in southern Minnesota in October was at 13-17% moisture, meaning it could go directly to farm grain bins without additional drying or could be hauled to grain warehouses with little or no price dockage for excess kernel moisture. Most of the 2011 corn crop was harvested with a test weight of 57-60 lbs./bu., which is above the standard test weight of 56 lbs. USDA [5] is estimating the 2011 corn yield in Minnesota at 160 bu./acre – well below Minnesota’s record average corn yield of 177 bu. in 2010. USDA is estimating the 2011 Minnesota soybean yield at 40 bu./acre, which is also well below the state record soybean yield of 45 bu., set in 2010.

 

Very Dry Conditions

Most of southwest and south-central Minnesota are now listed in “severe drought,” with nearly the entire state categorized as “abnormally dry.” The University of Minnesota Research Center at Waseca only received 2.52 in. of rainfall in the four-month period from August to November 2011 – compared to a normal precipitation amount of 12.59 in. during that time – which is among the driest in history. Many areas of the region received less than 2 in. of rainfall from late July until the end of November, and some locations received less than an inch of precipitation in that period. The very dry soil conditions during and after harvest season lead to difficulties for primary fall tillage [6], and resulted in some growers suspending fall nitrogen applications, due to concern over N loss. The lack of rainfall in the late summer and fall months has resulted in less than 3 in. of stored soil moisture in the top 5 ft. of soil, which is the lowest in several years, and is about 25-35% of maximum capacity. This could become a concern as we head into the 2012 growing season.

 

Grain Prices

Grain prices have been highly volatile – but quite strong – during most of 2011, with a fairly significant decline in corn and soybean prices during the last three months of the year. On Dec. 16, nearby CBOT corn futures closed at $5.83/bu., compared to $5.96 a year ago. January CBOT soybean futures closed at $11.30/bu., compared to $12.98 in mid-December 2010. The near-term CBOT prices on Sept. 12 were $7.45/bu. for December corn futures and $13.96 for November soybean futures. The rise in corn and soybean prices during the first nine months of 2011 were driven by steady domestic grain demand for the renewable fuel industry and for livestock feed needs, along with very strong export demand. The fairly sharp decline in grain prices since mid-September is due to slightly increasing grain stocks, financial uncertainty in the U.S. and abroad and a softening of export markets.

Local cash bid prices for corn in southern Minnesota were near or above $6 at many locations throughout much of 2011, until the past couple of months, reaching $7 on several occasions during the summer months. However, local corn prices have now declined to near $5.60/bu., as of Dec. 16. Cash soybean prices stayed near or above $13/bu. until mid-September, and have declined ever since down to the current level of about $10.85. By comparison, at this same time in recent years, local cash corn prices were near $5.50 in 2010, $3.50 in 2009 and 2008, and around $4 in 2007. Local cash soybean prices were about $12.70 in mid-December 2010, $9.80 in 2009, $8.25 in 2008, and $10.85 in 2007.

The higher level of grain prices during much of 2011 has helped most crop producers have a fairly profitable year in 2011. Many producers forward priced a significant portion of their 2011 corn and soybean crop prior to the price drop this past fall. Grain farmers were also able to capture some very favorable prices on their remaining 2010 corn and soybeans that were stored after harvest, and sold during 2011.

 

Crop Input Costs

Crop input costs increased moderately in 2011 compared to 2010, with fairly significant increases in expenses for seed [7], fertilizer [8] and fuel. For the second year in a row, many producers had very limited corn-drying costs, due to the early maturity of the corn and the much warmer weather pattern this past fall. Land rental rates increased significantly in many areas in 2011, and are likely to have another significant increase for the 2012 growing season. Agriculture interest rates, both for operating loans and longer-term loans, remain quite low, which is a trend that is likely to continue in 2012.

 

Livestock

The livestock industry finally had a fairly profitable year in 2011, following a somewhat stable year in 2010, which was preceded by the serious financial difficulties and negative profit margins in 2009 and 2008. Pork and beef producers experienced fairly strong market price levels throughout most of 2011, which resulted in some nice profit margins, even with the very high feed costs that existed throughout most of the year.

The dairy industry also rebounded nicely in 2011, with some higher fluid milk prices and improved profitability. Profit prospects for the livestock sector in 2012 continue to look quite favorable with a good market price outlook, lower feed costs early in the year, and strong product demand, both in the U.S. and abroad.

 

Editor’s note: Kent Thiesse is a former University of Minnesota Extension educator and now is Vice President of MinnStar Bank, Lake Crystal, MN. You can contact him at 507-726-2137 or via e-mail at [email protected]