Some Much Needed Rainfall

This past weekend, the extremely dry areas of southwest and south central Minnesota, and adjoining areas of northwest Iowa, finally received some much-needed rainfall, with most areas receiving 1 in. to over 2 in. of rainfall. The northern portions of the region may have received slightly less. Most of this area has been listed in a moderate to severe drought in recent weeks. The rainfall this past weekend will help relieve some of the drought stress to the 2007 corn and soybean crops; however, more rainfall will be needed in the coming weeks in order to avoid further deterioration of the 2007 corn and soybean crops. Longer term, much more rainfall will be need in the next few months to replenish depleted stored soil moisture supplies for the 2008 growing season.

Crop stress to corn and soybeans in south central and southwest Minnesota is quite variable depending on soil types and amount of rainfall in June and July. However, in general, crop deterioration has continued to increase in most portions of the region, especially those areas that were very short of rainfall, prior to this past weekend. What once looked like a good-to-excellent corn and soybean crop for 2007, now looks like an average-to-good crop at best, if we continue to get some timely rainfall in the next few weeks. There could be considerable crop loss in some areas, due to this extended dry weather pattern. Most soybean producers in southern Minnesota and Northern Iowa have been treating soybean fields for soybean aphids or spider mites, or both, in recent weeks. This is adding an extra $12-15/acre to the cost of production for most 2007 soybean acres.

Challenging Grain Markets

Besides dealing with weather concerns for the 2007 corn and soybean crop, grain marketing has been extremely challenging in recent weeks for upper-Midwest farm operators. At the same time that southern Minnesota and northwest Iowa farmers have seen their own 2007 crop yield prospects dwindle, they have seen some decline in grain market prices due to very favorable crop conditions in the central and eastern Corn Belt. In addition, the grain markets have been very erratic, with wide price swings from day-to-day, and the basis level between Chicago Board of Trade futures prices and local cash grain bids has been extremely wide. Some producers who were quite aggressive in marketing 2007 new-crop corn and soybeans earlier this Spring and Summer are now worried whether or not they will be able to produce adequate bushels in 2007 to cover the forward grain contracts later in 2007 and in 2008. This concern is most prevalent with corn producers who have a guaranteed corn delivery contract to farmer-owned ethanol plants, plus have forward priced a considerable amount of their projected 2007 corn crop. Fortunately, for farm operators with revenue-based Federal Crop Insurance policies for the 2007 corn and soybean crop who forward priced a considerable amount of anticipated 2007 production, the grain marketing impacts of having very reduced 2007 crop yields should be fairly minimal. Producers without good crop insurance protection could face some challenges – especially corn producers who were fairly aggressive in pricing their 2007 corn and have delivery commitments to ethanol plants.

Disaster Assistance

Last week, Minnesota Governor Tim Pawlenty and Minnesota Congressional leaders asked President Bush and USDA to consider a disaster declaration for 25 counties in Minnesota, due to the persistent dry weather and drought conditions that are likely to have a serious impact on 2007 crop production. Many of the counties in the initial request are in central and northern Minnesota, where drought-like conditions also existed during the 2006 growing season. If the current dry-weather pattern continues, more counties in the extremely dry areas of southwest and south central Minnesota will likely be added in the coming months.

A disaster declaration would make farm operators in the affected counties potentially eligible for low-interest loans through the Farm Service Agency. The disaster declaration would not result in added emergency commodity payments for 2007 crops, or for livestock feed assistance payments. Earlier this year, Congress approved a Disaster Assistance Bill for the 2005 and 2006 crop year that affected many portions of Minnesota, which did provide the opportunity for potential emergency commodity payments and livestock feed assistance to qualifying producers. Some members of the Minnesota Congressional delegation may push to add the 2007 crop year to that Disaster Bill, and have the associated emergency payments to crop and livestock producers available for losses incurred during the 2007 growing season.

Governor Tim Pawlenty has requested a 2007 disaster declaration for the following counties in Minnesota: Aitkin, Anoka, Benton, Brown, Carlton, Cass, Cook, Crow Wing, Douglas, Hennepin, Hubbard, Itasca, Kanabec, Lake, Mille Lacs, Morrison, Pipestone, Pope, Roseau, St. Louis, Sherburne, Swift, Todd, Wadena and Wright.

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.