Outlook 2019 with weather and price variables
The spring of 2019 will go down as one for the memory books. Wet, cool and late spring left many farmers cramming to get their crops planted. Many were unable to get all the crop planted on time and continued planting even after final planting dates lowering their level of insurance coverage.
Many fields were not planted at all and many acres applied to prevented planting acres. Last winter I prepared crop budgets for corn and soybeans to total $722 per acre for corn and $469 for soybeans with cash rents or return of investment plus property taxes estimated at $186 per acre.
How do the economics look today? Cash corn for harvest of 2019 at Lamberton’s Meadowland Coop was $4.17 and soybean price was $8.30. The budget used yields of 190 bushels per acre for corn and 52 bushels per acre for corn.
Though yield was projected for normal planting dates it did not take place for many Minnesota farmers. Using a 10 percent yield loss due to later planting dates, the yields would lower to 171 bushels for corn and 47 bushels per acre for soybeans. Without accounting for a farm labor charge and no government payments the prices necessary to cover input cost were projected to be $3.80 for corn and $9.02 for soybeans. Now using lower projected yield the breakeven prices increase to $4.22 for corn and $9.98 for soybeans per bushel.
The good news the cash corn prices are close to $4.22 but the bad news cash soybeans have not approached $9 for last years. This situation is opposite the past 5 years where corn lost money each year and soybeans made a profit after including the MFP payment for soybeans. Some farmers were unable to get some of both crops planted in on a reasonable timeline and chose prevented planting.
If a farmer had 75 percent coverage on 190 actual production history, the insurance payment would bed $313.50 at 80 percent coverage $334.40 and at 85 percent coverage $355.30. If a farmer had applied fertilizer at $120 per acre and rent @ $186 and $40 for weed control this totals $346 which mean a loss at 75 and 80 coverage levels, but a small profit at 85 percent insurance coverage level. If a farmer had not applied fertilizer yet all three scenarios would generate a profit. For soybeans 75% coverage at 52 bushels, the insurance payment would be $223.24 and for 80% the payment would be $238.12 and for 85 % insurance cover the payment would be $253.00.
With rent costing $186 and weed control $40 per acre for a total of $226 all three insurance levels would be close to covering costs. Farmers could also chose to plant cover crops which would have tillage and seed cost and some weed control costs, not likely to total less than $40 per acre.
My four marketing groups averaged over 15% of intended corn acres not planted and 5% of the soybean acres not planted. On top of this, farmer have experienced wet weather pattern causing drown out areas in fields that were planted. Historically on average it takes the profits from 12 acres of good crop to make up for the loss of one drowned out acre.
Many farmers have experienced these heavy rain events and loss planted acres due to standing water. Both corn and soybean prices have significantly increased since the end of May and may still increase further after the August 12th federal report. A price increase is still necessary for farmers to make a profit in the wet growing season of 2019.