Ag Review For 2006

As we reach the end of the year, it’s a good time to reflect on what happened agriculturally in the region in 2006. Following are some highlights regarding where we stand on crop production, grain prices and livestock profits at the end of 2006.

Crop Production – Corn and soybean yield reports for 2006 across Southern Minnesota were good to excellent for the most part; however, the yields were much more variable than the excellent yields achieved in 2005. Very hot, dry weather in July, along with several severe wind and hailstorms late in the growing season, lead to reduced yields in some locations in 2006. There were some weigh-wagon yield reports well over 200 bu./acre for corn, and above 65 bu./acre for soybeans this past year. Whole field yields on every crop acre more typically ranged from 150 to 185 bu./acre for corn in many areas of Southern Minnesota, and from 45 to about 63 bu./acre for soybeans. This makes the 2006 corn and soybean yields above average, but below the record yields of 2005.

USDA is projecting the statewide average 2006 yields for Minnesota at 166 bu./acre for corn and 43 bu./acre for soybeans, which compares to 2005 average statewide yields of 171 bu./acre for corn and 44 bu./acre for soybeans. In the prior three years, Southern Minnesota corn yields averaged approximately 159 bu./acre in 2002, 152 in 2003, and 172 in 2004; while soybean yields averaged about 47 bu./acre in 2002, 34 in 2003, and 40 in 2004.

Grain Prices – Many growers also took advantage of some stronger prices for corn and soybeans in the fall of 2006. December Chicago Board of Trade (CBOT) corn futures were trading above $3.60/bu., and November CBOT soybean futures were close to $6.50/bu. on Dec. 19. This compares to about $2.30-2.35/bu. for December corn futures, and $5.35-5.40/bu. November soybean futures in mid-September. Local cash bid prices for corn in Southern Minnesota been above $3/bu. at many locations in recent weeks, which represents the highest post-harvest cash corn prices in several years. Cash corn prices at most local grain markets in Minnesota were below $2/bu. from early summer though late September. Most cash soybean prices at Southern Minnesota grain elevators were near or above $6/bu. in recent weeks, which are the highest cash soybean price levels of calendar year 2006 at most locations.

By comparison, a year ago at this time on Dec. 19, 2005, the December CBOT nearby corn futures were trading at $1.94/bu., the local cash corn prices were around $1.60/bu.; however, most producers did receive a $.45-.50/bu. LDP on 2005 corn. There was no LDP available on 2006 corn or soybeans. On Dec. 19, 2005, November CBOT nearby soybeans futures were trading at $5.94/bu., and cash soybean prices were at about $5.60/bu. at most locations, with no LDP on soybeans.

Many growers had already forward priced some of their 2006 corn crop at $2-2.30/bu. prior to the current price rally, which started in late September. That means they missed the current strong corn prices on some of their 2006 crop. The good news for producers that 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 2007, and even 2008 corn crops. Most cash corn market bids for the harvest season of 2007 are near or above $3/bu., which is a very strong price level a year before harvest.

Livestock – Profits in the livestock sector have been fairly good in 2006. Beef feedlot and cow/calf profits have been mixed in 2006, depending on the timing of marketing. Swine producers have benefited from the strong consumer demand and very good pork exports in 2006, resulting in hog prices that were higher than expected for most of the year. Dairy producers also saw good milk prices and fairly good profitability early in 2006. The entire livestock sector has seen profitability decline in recent months due to the rapid rise in feed costs, reflecting the much higher grain prices. There has been some expansion of swine facilities in Southern Minnesota during 2006.

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.