Yields spotty; prices just plain bad
"I've got nothing positive to say," said Jim Raymond, ag lender for M&I Bank, Janesville. "We have gone from what we considered an excellent year to what is going to be a mediocre year."
No one expected yields to be great this season after early-summer flooding caused delays and damage to local crops. But Raymond expected recent record high commodity prices to make up for it.
That didn't happen.
In May, fall corn was trading at $5.75 per bushel at the DeLong Co. in Clinton. That compares to $3.33 corn on May 1, 2007, and $2.34 corn on May 1, 2006.
On Friday, DeLong's was back down to paying $3.33 per bushel for cash corn.
As predicted, yields have been spotty, said Rock County UW-Extension Agent Jim Stute. Growers have been telling Stute that yield monitors inside their combine cabs show swings from 15 to 50 bushels per acre in the same field, Stute said.
Average soybean yield in Rock County is 50 bushels, he said.
June flooding pushed planting and harvesting back about two weeks, said Judy Schambow, Rock County Farm Services Agency director.
A dry August is more to blame for weak yields, said DeLong's grain division merchandiser Doug Kloepping. Soybeans are faring worse than corn, he said.
"On the good heavy ground where it didn't dry out, yields are better," Kloepping said. "In the lighter tops of hills, it's worse."
Kloepping said DeLong's has customers from north of Fond du Lac whose bean yields have been "nothing." Yet, test plots on fields owned by Rock County yielded 70 bushels per acre, Stute said.
So what happened to those prices that would have made up for spotty yields?
More and more, commodity prices are tied to crude oil prices, Raymond said. Twenty-five percent of American corn is going into ethanol, he said. As the price of crude oil drops, so does the price of ethanol, he said.
Farmers feel the crunch of market instability at either end of the growing process, said M&I ag lender Rene Johnson.
"It's not just the fuel we put in the tractor," Johnson said. "It's not just the input of growing. We're selling corn now to go with the fuel. So it's not just tough on the front end when we're planting, it's on the back end when we're harvesting."
High fuel prices also drive the cost of fertilizer. For example, in 2006 a ton of dry fertilizer was $330 delivered, DeLong's fertilizer manager Tim Sanders said.
That same ton costs $1,300 today.
It's hard to say if fertilizer and other input costs will drop to match the drop in grain prices, Raymond said.
"One of major issues is, in 2009, if you're a farmer, you want to have a feel for what cost of production's going to be for next year," Raymond said. "At this point, you don't. It's really hard."
Lower corn prices might seem good for a dairy farmer, where corn is an input to the end product of milk. But milk prices are falling right along with grain prices, Raymond said.
In June, milk was trading for $21 a hundredweight, or about 100 pounds. Today it's $15 a hundredweight.
"Half of our ag lending business out of the Janesville office is related to the dairy industry," Raymond said. "And 25 percent of their gross income has evaporated in three to four months time."