- Grain prices have been highly volatile during the last half of 2010, with large price movements up and down
- Crop input costs in 2010 stabilized, following sharp increases in most input expenses from 2007 to 2009
The end of the year is a good time to reflect on what happened agriculturally in the region in 2010. Here are some highlights regarding crop production, grain prices, crop input costs and livestock profits for 2010.
This year will be remembered as a very good to excellent crop year in most portions of southern and western Minnesota; however, some areas were hurt by severe storms that lead to some yield reductions. Most of the corn in the region was planted during the last half of April and first few days of May and got off to a good start due to warm soils with adequate moisture. A Mother’s Day frost on May 9 did set the corn back in many areas; however, most of the corn recovered quite nicely, with very little replanting being required. Tornadoes and severe storms on several occasions in mid-June caused considerable property damage and crop damage across southern Minnesota due to wind, hail and heavy rains. In late September, 8-12 in. of rain fell across a large area of southern Minnesota, causing flooding and significant crop loss. After that storm event, harvest weather in October was almost ideal. Corn and soybean harvest across the Midwest was virtually completed by early November, which was the exact opposite of 2009, when the Midwest experienced the slowest and most delayed harvest in over a decade.
Overall, corn and soybean yields in 2010 were good to excellent; however, the yields were much more variable across southern Minnesota, primarily due to the severe storms in June, as well as the heavy rains and flooding in September. Some portions of western and central Minnesota had their best corn and soybean yields ever. There were many yield reports well over 200 bu./acre for corn, scattered throughout the southern half of Minnesota. Whole field yields on every crop acre typically ranged from 175 to 200 bu. for corn, and from 45 to 55 bu./acre for soybeans in most areas of southern Minnesota. Very little drying was required for the 2010 corn crop, with most corn being harvested at 14-17% moisture, making it safe for on-farm storage. The quality of the 2010 corn crop was also excellent, with most test weights well above the normal 56 lbs./bu.
USDA is projecting the overall 2010 average corn yield for Minnesota at a record level of 175 bu./acre, surpassing the previous record of 174 bu. in 2009 and 2005. The projected 2010 average corn yield in Minnesota is the highest among the major corn-producing states, with Iowa’s corn yield estimated at 167 bu., Illinois at 159 bu., Indiana at 160 bu. and Nebraska at 166 bu. USDA is projecting the overall average soybean yield in Minnesota at 44 bu./acre, just below the state record average soybean yield of 45 bu. in 2005. The estimated average 2010 soybean yield in Iowa is 52 bu.
Grain prices have been highly volatile during the last half of 2010, with large price movements up and down; however, the overall trend in both the corn and soybean market this past fall has been significantly higher. March CBOT corn futures closed at $5.96/bu., and January CBOT soybean futures closed at $12.98/bu. on Dec. 17. This compares to near-term CBOT prices in late August of about $4.15-4.25/bu. for December corn futures, and $10-10.25/bu. for November soybean futures. The recent rapid rise in corn and soybean prices is being driven by steady domestic grain demand for the renewable fuel industry and for livestock feed needs, lower-than-expected crop yields in many areas of the U.S. and very strong export demand.
Local cash bid prices for corn in southern Minnesota were above $3 at most locations throughout much of 2010, while cash soybean prices stayed above $8.50 throughout the year. Local cash corn prices in southern Minnesota were in the $3.15-3.50 range during much of the first seven months of the year, before beginning the rapid price rise in the last four months, ending the year with cash corn prices above $5. Cash soybean prices in southern Minnesota ranged from $8.75 to $9.50 during most of the first six months of 2010, before rising to the current cash price levels over $12. The higher-than-expected grain prices combined with average to above-average corn and soybean yields have helped most crop producers have a very profitable year in 2010. Many producers forward priced a significant portion of their 2010 corn and soybean crop prior to the price rise this past fall; however, they are now using current favorable grain prices to forward price some of their anticipated 2011 corn and soybean production.
By comparison, at this same time in recent years, nearby CBOT corn futures in mid-December were trading near $3.85 in both 2009 and 2008, $4.41 in 2007, $3.60 in 2006, and $1.94 in 2005. The local cash corn prices were near $3.50 at this time in 2009 and 2008, and around $4 in 2007. Nearby CBOT soybeans futures in mid-December a year ago in 2009 were trading near $10.40, $8.65 in 2008, $11.60 in 2007, $6.50 in 2006 and $5.95 in 2005. Local cash soybean prices were about $9.80 in mid-December 2009, compared to $8.25 in 2008 and $10.85 in 2007.
Crop Input Costs
Crop input costs in 2010 stabilized, following sharp increases in most input expenses from 2007 to 2009. In many cases, crop input costs for 2010 will be lower than 2009, due to the limited corn drying costs this past fall, compared to the $50-80/acre expense that many producers incurred last fall. It appears that the price for anhydrous ammonia and other fertilizer inputs, as well as seed costs and projected fuel expenses, will be significantly higher for the 2011 crop year. Land rental rates, which were fairly stable in 2010, are also likely to increase in most areas for 2011. Agriculture interest rates, both for operating loans and longer-term loans, remain quite low, a trend that should continue into 2011.
The livestock industry finally got some relief in 2010 from the serious financial difficulties and negative profit margins in 2009 and 2008. Pork producers, and most other segments of the livestock industry, experienced some profitability during the first six to eight months of 2010, with improved market prices and lower feed costs. However, by the fourth quarter of 2010, feed costs had risen sharply, market prices had dropped and most livestock profit margins were barely breakeven or were negative. It appears that livestock profit margins will remain extremely tight in most sectors well into 2011.
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 firstname.lastname@example.org.