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Outlook for 2017 Corn and Soybeans

By David Bau, Extension Educator

I was asked to speak at FARMFEST on a panel discussing Strategies for Farming in Challenging Times.  I thought I would examine some of the reasons for the stress in farming.  If you look at 2016 farming result for corn and soybean producers, the numbers are better than they were in 2015 according to FINBIN figures, but on average 1382 corn farmers in Minnesota lost $62.35 per acre, while making $7.88 per acre on soybeans.  This compares to a loss of $55.07 per acre for corn in 2015 and income of $8.34 for soybeans.  A trend of larger losses was created from 2015 to 2016 even while input costs including rent rates declined and yields increased. Results in the marketing groups I work with, shows better income on 2016 crop sales than 2015 crop but did not cover their total costs in either year.

So what about 2017?  Each year farmers in my marketing groups determine breakeven prices needed to cover their crop input costs and living expenses.  The average breakeven price is $4.26 cash for corn and $10.78 for soybeans. These are based on historical average yields of 177 bushels per acre for corn and 50 bushels per acre for soybeans. The last two crop years experienced record yields. If I used 200 bushels of corn per acre and 55 bushels of soybeans per acre, the breakeven prices declined to $3.77 for corn and $9.80 for soybeans.

Yields could be good again this year, but probably not record levels and closer to historical yields.  So farmers will need $4.00 cash per bushel for corn and $10.50 for soybeans.  So what have the 2017 December corn and November soybean contract prices been?  The high in December 2017 corn futures since 2016 has been $4.23 and assuming a 50 cent basis would be $3.63 cash high, but basis has been wider than normal due to large crops the past couple of years, so using a 60 cent basis would make the high cash corn price $3.53.  For soybeans, the high in November soybeans since 2016 has been $10.47 and with a normal 60 cent basis the cash price would be $9.87 and with wider basis of 70 cents which is more common the cash price would be $9.77.

The average cash corn and soybeans prices for Worthington in 2017 has been $3.23 for corn and $9.07 for soybeans. Well below the prices needed to cover costs.  Looking at 2016 figures from FINBIN 70 percent of Minnesota farmers had a breakeven higher than $3.23 and 30 percent of soybean farmers had costs higher than $9.07. Today’s cash prices in Worthington were $3.16 and $9.16 for corn and soybeans.

So the outlook is this:  If the average farmer could get the record yield experienced in 2016 and sell all of their crop at the contract high prices they would cover their costs. If they sold their crop at the average 2017 prices they would have a loss and if they get normal yields closer to their historic averages the losses will be larger.

So what are some strategies farmers are engaging in?  Farmers are examining all costs and looking for ways to lower cost of production without affecting yield, the largest input cost is land rent, followed by fertilizer, seed and chemicals. Farmers have given up some rented land that does not cover costs at current rental rates. Farmers are looking very carefully at every new purchase to determine if it will add or hurt the bottom line.  Farmers are looking for ways to adjust and finance a cash flow that will keep them farming in 2018.
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