As we reach the end of the year, it is a good time to reflect on what happened agriculturally in the region in 2007. Following are some highlights regarding where we stand on crop production, grain prices and livestock profits at the end of 2007.
Crop Production – Corn and soybean yield reports in 2007 across southern Minnesota were much more variable than the excellent yields achieved in 2005 and 2006. However, most yields were better than expected, given the extremely dry weather pattern in late June and July. The extended dry weather period from late June to early August, along with several severe storms with hail and excess rainfall late in the growing season, lead to reduced yields in some locations in 2007. There were some yield reports over 200 bu./acre for corn, and above 60 bu./acre for soybeans this past year in the eastern portions of south-central Minnesota and in southeast Minnesota. Whole field yields on every crop acre more typically ranged from 145 to 175 bu./acre for corn in most areas of Southern Minnesota, and from 40 to 55 bu./acre for soybeans. This makes the 2007 corn and soybean yields close to average trendline yields for the region, but below the excellent yields of 2005 and 2006.
Grain Prices – Many growers took advantage of some strong prices for corn and soybeans throughout most of 2007. December CBOT corn futures were trading near $4.40/bu., and November CBOT soybean futures were close to $11.60/bu., on December 17. This compares to about $3.30-3.50/bu. for December corn futures, and $9.25-9.75/bu. November soybean futures in mid-September. Local cash bid prices for corn in southern Minnesota were near or above $3/bu. at many locations during most of 2007, which represents one of the longest period of cash corn prices at these levels ever. Cash soybean prices in southern Minnesota ranged from $6.75 to $8/bu. during the first eight months of 2007, but have risen to well above $10/bu. in recent weeks, which ranks among the highest-ever post-harvest cash soybean prices. The continued high corn and soybean prices are being driven by strong domestic grain demand for the rapidly expanding renewable fuel industry and for livestock feed needs, as well as continued strong export demand. The higher-than-expected grain prices, combined with near-average corn and soybean yields, has made 2007 a very profitable year for most crop producers in southern Minnesota.
By comparison, at this time in December 2006 and 2005, the December CBOT nearby corn futures were trading at $3.60/bu. in 2006, and $1.94/bu. in 2005. The local cash corn prices were near $3/bu. at this time in 2006, and around $1.60/bu. in 2005. However, most producers did receive a 45-50¢/bu. LDP on 2005 corn. There was no LDP available on 2006 or 2007 corn or soybeans. In December, 2006, November CBOT nearby soybeans futures were trading at about $6.50/bu., while being at only $5.94/bu. in December 2005. Local cash soybean prices were at about $6/bu. a year ago, and near $5.60/bu. in December 2005.
Many growers had already forward-priced much of their 2007 corn and soybean crop earlier, in order to take advantage of the strong prices throughout most of 2007. This means they may be missing the current strong prices on much of their 2007 crop production. The good news for producers who regularly forward-price some of their anticipated production prior to planting and during the growing season is that there have been some good opportunities to begin pricing the 2008, and even 2009, corn and soybeans. Most cash corn market bids for the 2008 harvest season above $3.75/bu. in recent weeks, with soybean harvest bids above $10.50/bu.
Livestock – Profits in the livestock sector have generally declined during 2007. Beef feedlot and cow/calf profits have been mixed in 2007, depending on the timing of marketing. Swine producers benefited from some good market prices early in 2007, due to strong consumer demand and very good pork exports, but saw hog market prices decline sharply in the last half of 2007, with hog profit margins down to zero or lower for many producers. Dairy producers also saw good milk prices and fairly good profitability early in 2007, which again declined sharply later in the year. The entire livestock sector has seen profitability decline during 2007, due to the rapid rise in feed costs, reflecting the much higher grain prices. There continued to be some expansion of swine facilities in southern Minnesota during 2007, which is being driven by longer-term strength in projected profitability in hog production, and the desire by crop producers to derive more of their crop nutrient needs from hog manure, rather than solely depending on commercial fertilizer.
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 kent.thiesse@minnstarbank.com.