As we reach the end of the year, it is a good time to reflect on what happened agriculturally in the region in 2009. Following are some highlights regarding where we stand on crop production, grain prices, crop input costs and livestock profits at the end of 2009.
Crop Production – 2009 will be remembered as the crop year that would not end. Corn and soybean harvest across the Midwest was the slowest and most delayed in over a decade. In fact, there are still areas of southeast, central and western Minnesota and Wisconsin, Illinois and the Dakota’s where corn harvest is continuing. Most of the crop harvest and fall tillage were completed by late November in southern Minnesota and northern Iowa. Corn and soybean yield reports in 2009 across southern Minnesota were highly variable, due to the extremely dry weather pattern in late June and July, along with very cool temperatures throughout much of the growing season. Areas that received some beneficial rains in from late June to early August had above-average corn and soybean yields in 2009; however, other areas that were extremely dry during that period had reduced yields in 2009. There were many yield reports well over 200 bu./acre for corn in extreme south-central Minnesota this past year. Whole-field yields on every crop acre more typically ranged from 175 to 200 bu./acre for corn in most areas of southern Minnesota, and from 40 to 55 bu. for soybeans. This makes the 2009 corn yields slightly above average, and 2009 soybean yields close to average trend-line yields for the region.
There are plenty of problems remaining with the 2009 corn and soybean crop, much of which is now in storage, either in on-farm grain bins or at local elevators. Low test weights on much of the corn will result in less bushels than expected by weight when the corn is sold or fed, and could lead to price discounts at grain elevators or ethanol plants. Much of the 2009 grain was placed in farm grain bins at less than ideal conditions, which could lead to spoilage and other grain storage issues in the coming months.
Grain Prices – Many growers took advantage of some strong prices for corn and soybeans throughout much of 2009. December CBOT corn futures were trading near $3.85/bu. and November CBOT soybean futures were close to $10.40/bu. on December 17. This compares to about $3.20-3.30 for December corn futures, and $9.10-9.20 for November soybean futures in mid-September. Local cash bid prices for corn in southern Minnesota been above $3 at most locations during all of 2009, with local cash corn prices rising above $4/bu. in May and June. Cash soybean prices in southern Minnesota ranged from $9 to $10/bu. during the first four months of 2009 before rising to $10-12 from May to August, and then dropping back to $9-10 in the past four months. The continued high corn and soybean prices are being driven by strong domestic grain demand for the renewable fuel industry and for livestock feed needs, serious harvest delays in many areas of the U.S. and improved export demand. The higher than expected grain prices, combined with average to above-average corn and soybean yields has helped most crop producers offset very high crop input costs in 2009.
By comparison, at this same time in recent years, December CBOT nearby corn futures were trading near $3.85 in 2008, $4.41 in 2007, $3.60 in 2006 and $1.94/bu. in 2005. The local cash corn prices were near $3.40 at this time in 2008, and around $4/bu. in 2007. In December 2008, November CBOT nearby soybeans futures were trading near $8.65, compared to $11.60 in 2007, $6.50 in 2006 and $5.95 in 2005. Local cash soybean prices were at about $8.25/bu. a year ago and near $10.85 in December 2007.
Crop Input Costs – Crop input costs rose considerably in 2008, and were considerably higher again in 2009. The cost of anhydrous ammonia for nitrogen fertilizer for the 2009 corn crop was more than double what it was in 2007. Seed costs for corn and soybeans were also much higher in 2009, compared to previous years. Most land rental rates increased 25-40% in 2008 and 2009, compared to 2007 rental rates. Then to top it off, most corn producers spent two to three times their budgeted expense to dry the very wet 2009 corn crop at harvest, with many producers having a $60-90/acre corn-drying expense this fall. Fortunately, the price for anhydrous ammonia and other fertilizer inputs, as well as projected fuel expenses, should be significantly lower for the 2010 crop year, and land rental rates for 2010 have seemed to stabilize in most areas. However, there are still areas of rising cash rental rates, and corn and soybean seed costs continue to increase.One bright spot in 2009 was that short-term interest rates were quite low, and should remain relatively low in 2010.
Livestock – The livestock industry continued to face serious financial difficulties in 2009, due to high feed, fuel and other input costs. Some hog producers lost $25-50/head marketed for several months of 2009 following the H1N1 outbreak in spring 2009, and have had negative profit margins for over two years. Cattle feedlot operators also had negative profit margins early in the year; however, profits on fed cattle improved considerably during the last half of 2009. Profits have also been highly negative for the dairy industry in 2009, with milk prices running well below breakeven profit levels throughout the year. The U.S. government has tried to implement some measures to help the livestock sector in recent months, especially the dairy industry. By year’s end, we are seeing major liquidation of both hog and dairy operations in many areas. Even with the some expected improvement in meat and milk prices in the coming months, livestock profits remain extremely tight in most sectors as we head to 2010.
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]