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2015 Agriculture review, part 2: Input costs, grain prices and avian flu

Input costs

Crop input costs in 2015 were slightly lower than 2014 levels in most instances, with fairly steady seed and chemical costs, and slightly lower fertilizer and fuel costs. Crop input costs are expected to remain fairly steady again for the 2016 crop year. Corn drying costs in 2015 were quite low in the Upper Midwest, due to the favorable growing season and the ideal fall harvest weather. Land rental rates in most areas of the Upper Midwest were steady to slightly lower in 2015; however, many average land rental rates were higher than breakeven levels for crop producers in 2015. Feed costs for livestock producers moderated significantly in the second half 2014, and dropped even lower during 2015. Agriculture interest rates, both for operating loans and longer term loans, remained quite low in 2015; however, there may be slight adjustment upward in 2016, now that the Federal Reserve has made a modest increase to the prime interest rate, which is used to set local interest rates.

Grain Prices

Local cash grain prices in southern Minnesota started 2015 at about $3.70-3.80 per bushel for corn, and from $9.50 to $10 per bushel for soybeans. Local cash prices dropped to near $3.30 per bushel for corn, and below $9 per bushel for soybeans by August of this past year. Regional cash grain prices are near $3.40-3.50 per bushel for corn, and $8-$8.30 per bushel for soybeans as we end 2015. New-crop prices for fall 2016 at local grain markets are very close to the current cash prices for both corn and soybeans. Breakeven grain prices in southern Minnesota for the 2016 crop year, based on average crop yields, input costs, and land expense are expected to be near $4 per bushel for corn and over $9.50 per bushel for soybeans.


Avian flu virus outbreak

Most likely, one of the top agriculture stories for the year in the Upper Midwest will be the sudden and deadly outbreak of the H5N2 virus, or avian flu virus (bird flu) in spring 2015. There were a total of 219 cases of avian flu in 15 states reported in the U.S from late December 2014 until mid-June 2015, resulting in a loss of over 48 million birds nationwide. Minnesota and Iowa were hit particularly hard by the avian flu outbreak, accounting for approximately 80% of the total reported cases, and 85% of the total birds lost.

Minnesota had a total of 101 cases of the avian flu virus from early March until early June in 2015, resulting in the loss of nearly 9 million birds, with the turkey industry being hit very hard. Minnesota is the largest turkey-producing state in the nation. Central Minnesota was hit particularly hard, with 73 cases of avian flu in the counties of Kandiyohi, Stearns, Meeker, Swift and Renville. The outbreak also affected the supply of turkeys at some locations, as well as resulting in work slowdowns at some processing plants. Fortunately, there have been no new cases of the H5N2 virus reported in Minnesota since June 5, 2015, and most turkey production facilities are back operating at capacity by year-end.

In Iowa, it was the egg laying industry that was devastated by the avian flu outbreak. There were 75 cases reported in Iowa from mid-April until mid-June, resulting in the loss of 31.7 million birds, primarily laying hens. This affected processing plants and egg supplies, resulting in localized increases in retail egg prices. The procedures to return the egg laying industry back to full production is a much longer process than in the turkey industry. The good news is that the Iowa egg laying flocks are re-populating, and there have been no new cases of the avian flu virus in Iowa since June 17, 2015.

The severe outbreak of the avian flu virus resulted in all live poultry exhibitions at County Fairs and the State Fairs in Minnesota and Iowa being cancelled in 2015. State Fairs and some County Fairs held very creative poultry events, without live birds, as an alternative to the normal 4-H poultry shows. Minnesota lifted the ban on live Poultry exhibitions late in 2015. Most egg laying operations, turkey facilities, and other poultry producers have significantly increased on-farm biosecurity measures to help prevent future avian flu outbreaks. As we head into 2016, the poultry industries of Minnesota and Iowa will again be on the watch for another potential occurrence of the H5N2 virus

TAGS: Soybeans
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