Harvest nears completion
Some very good late-fall weather conditions in early November have allowed most farm operators in southern Minnesota to complete their 2007 corn and soybean harvest, with just a few isolated fields of corn left to be harvested. Many growers are still finishing up fall tillage and are completing fall fertilizer and manure applications. Wet field conditions from excessive rainfall earlier this fall have certainly turned out much more positive that it initially appeared.
There was a very wide variation in corn and soybean yields in most of the region in 2007, primarily due to limited rainfall during the middle part of the growing season. Many whole-farm corn and soybean yields in south-central and southwest Minnesota were very close to long-term average yields of 43-48 bu./acre for soybeans, and 160-170 bu./acre for corn, which is lower than the excellent 2005 and 2006 crop yields for most producers. However, there are areas of the region that were extremely dry from late June to early August and had lower-than-average corn and soybean yields in 2007. Some areas of eastern south-central and southeastern Minnesota received more timely rainfalls during June and July and had above-average crop yields in 2007.
Grain markets strong
Futures grain prices on the Chicago Board of Trade (CBOT) and local cash bids for corn and soybeans have remained strong in recent weeks. Friday, Nov. 9, the CBOT prices closed at $3.79/bu. for corn, and $10.44/bu. for soybeans. Even though 2007 corn and soybean yield levels in the U.S. were quite good, there is not projected to be an oversupply of grain anytime soon due to increased domestic usage of corn and soybeans for renewable fuel production and for livestock feed and due to strong export demand for grains. The weakened value of the U.S. dollar in foreign countries is actually helping encourage more demand for grain exports, even during a time of relatively high grain prices, compared to recent years.
The local grain price bids at Lake Crystal, MN, on Monday morning, Nov. 12 were $3.51/bu. for corn and $9.62/bu. for soybeans. This is considerably higher than the $2.94/bu. cash corn bid on October 8, but lower than the $3.89 cash corn bid back on June 18, 2007. The current cash bid for soybeans is well above the $8.21/bu. local soybean price on Oct. 8 or the $7.70/bu. price on June 18, 2007. By comparison, local cash grain prices in Lake Crystal one year ago on November 6, 2006 were $2.95/bu. for corn, and $6.06/bu. for soybeans. The current basis for corn is near 30¢/bu., which is a much tighter basis level than a year ago when the corn basis was over 60¢/bu. The current soybean basis is about 80¢/bu., compared to less than 50¢/bu. in early November 2006. The basis is the spread between the CBOT futures prices and the local cash grain bids on a given day. A tighter basis is usually more beneficial to farm operators because they sell grain at local cash bid prices.
Many producers are also taking advantage of strong CBOT futures prices, and very good forward-price bids at local grain markets, to begin pricing their anticipated grain production for 2008. On Nov. 12, local cash bids for late October 2008 delivery were approximately $3.75/bu. for corn and near $9/bu. for soybeans. Forward pricing some of the anticipated 2008 crop production is likely a very good risk management tool, as producers begin planning for the 2008 crop year. Crop input costs for seed, fertilizer and fuel are likely to increase significantly for the 2008 growing season, as are cash rental rates on rented farm land. As a result, the net margins from crop production in 2008 may not increase significantly, even with the relatively high level of grain prices that are currently projected for 2008.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.