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Tuesday, May 3, 2016

Local corn, soybeans looking good - but the prices aren't

Thursday, October 23, 2008

A farmer's life is rooted as much in uncertainty as in the rich black dirt of northwest Iowa. A season that started out appearing doomed by bad weather had grown into one of huge promise with rebounding crops and record commodity prices. But now that the rich bounty of grain is hitting the bins, the prices are withering.

Corn that in June topped $7 and in late August was still valued at $5.25 a bushel locally is now down to $3.50. Soybeans that were $16-plus in early summer and $12.72 near the start of September locally are now bringing just over $8.

The current prices are still high by historical standards, but they don't look so high to farmers paying more than they've ever paid for fertilizer, fuel and other things they need to grow a crop.

Some farmers paid well over $800 a ton for fertilizer over the summer, more than double what they paid a year earlier. Fertilizer costs are expected to increase by a large amount again.

Monty Whipple, like a lot of corn and soybean farmers, figures it was time for the run of sky-high crop prices to end. "You know that it has its up and downs and cycles, and nothing stays glamorous forever," he said.

But he admits that he, and maybe a lot of others, started thinking those prices might just last a while longer. "We all get caught thinking things will never go back down," he said.

"Our potential was there," said Rolland Vandeveer, who has more than 5,000 acres of corn and soybeans. "This probably was going to be our best year for the last 20 years."

The crash on Wall Street is having a big impact on the gravel-roads economy, says Dennis Reyman, a partner in Stalcup Ag Services in Storm Lake.

"The liquidation on Wall Street forced the commodity funds to pull dollars out of anything they could just to stay liquid - it turned out the crop commodities were an easy place to grab money from, and there has been a lot of liquidation on the Board of Trade which has brought prices down drastically."

The good news is that area farmers also are not a gambling breed. "A fair amount of them took advantage of the great opportunities to forward sell their crop last summer at record high prices," Reyman said. "What they don't have already sold, I don't they are going to sell. They'll wait and see if things improve."

The fundamentals of supply and demand still look pretty good, the ag management expert suggests.

The wild card is how worldwide demand for food could be impacted by the financial crisis, which is no longer limited to American big business.

Nearly a quarter of the corn and soybean crops end up in exports - "though locally I doubt if much of it goes very far because we are burning it up in ethanol and livestock production," Reyman says.

Despite the shaky start to the season that had some area growers replanting areas of their fields, yields in the Buena Vista County area are looking strong.

"Beans are coming in ranging from the upper 40s (bushels per acre) into the upper 50s and some are in the 60s. That's a little better than average, although anybody who didn't spray for aphids is taking a pretty good hit in the yield," Reyman says.

"We don't have a whole lot of corn in yet, but what has been harvested is showing real good numbers. The challenge there is getting it to dry down."

The rainy days this week aren't helping matters any.

Ag Economist Pat Westhoff said that if someone owns all the land they operate, the chances are good that they can cover their costs and likely make a significant profit this season. But it might be more difficult for those who rent.

Local land values - another good indicator of farm optimism - are holding steady or backing off only slightly in the face of the economic crisis. Two recent sales of agland areas just north of Storm Lake came in very similar to what such ground brought in the spirited months of summer.

With a good crop in hand and strong demand, local farmers aren't panicked over declining commodity prices.

"I would say most of them are cautiously optimistic. It is still a very good farm year around here," Reyman said.

* The U.S. Department of Agriculture has gradually ratcheted up expectations for both crops since the wet spring. Earlier this month, the USDA said it expects American farmers to harvest 12.2 billion bushels of corn, which would be the second largest corn crop on record after last year's biggest ever. The agency expects 2.98 billion bushels of soybeans, 11 percent more than a year ago.

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