Overall, crop conditions across most of the southern two-thirds of Minnesota have improved considerably in the past couple of weeks. In late May, many areas of southwest, south-central and central Minnesota were impacted by excessive rainfall, severe storms and some crop emergence problems; however, much of the crop has now recovered. There were some locations that had severe storms again in the past week with strong winds, hail and heavy rainfalls, with portions of southeastern Minnesota being impacted most significantly.
Most of the region has now received adequate rainfall during the months of May and June to recharge stored soil moisture to more normal levels. As we headed into the spring this year, there was a great deal of concern due to very low stored soil moisture levels, following a dry fall and a fairly dry early spring. There are a few isolated areas that have received less rainfall in 2012, and are still a bit on the dry side. The ample rainfall in the past month and the improved levels of stored soil moisture will likely be very beneficial later in the growing season.
As of June 1, stored soil moisture levels at the University of Minnesota (U of M) Research and Outreach Center at Waseca were at 10.21 in. in the top 5 ft. of soil, which is 92% of capacity for stored soil moisture. At the Southwest Minnesota U of M Research Center at Lamberton, the measured stored soil moisture was at 5.56 in., which is about 63% of capacity – a big improvement over the 3.09 in. of stored soil moisture on April 1. Lamberton has recorded 10.79 in. of rainfall since May 1 – more than double the normal rainfall. However, many of those rainfall events were very intense with considerable runoff, which limited the impacts on the stored soil moisture.
The combination of ample soil moisture, along with normal to above-normal temperatures is providing almost ideal growing conditions for corn and soybeans in mid-June. The growth pattern of both corn and soybeans are progressing at a rapid pace, and the crops look good to excellent in many areas, except those localities that were impacted by the severe storms. One problem with the frequent rainfall events in the past few weeks has been timely weed control for corn and soybeans. Most growers rely heavily on post-emergence herbicide applications for primary weed control, which are applied after both the crop and weeds are emerged. The numerous rainfalls, combined with several windy days, have greatly limited the ability of farm operators to make timely herbicide applications.
Many livestock producers have begun the second cutting of alfalfa in the past week, in order to gain the highest feed quality, while other hay producers are fighting wet field conditions and still trying to finish up their first cutting. The harvest of canning peas is also getting underway across southern Minnesota. A somewhat dryer weather pattern in the next couple of weeks would be helpful for both the hay and pea harvest, as well as for general crop growth across most of the region.
Crop Prices Move Downward
Corn and soybean prices have been quite erratic this spring, due to tight supplies of soybeans, increasing supplies of corn, stable demand and changing weather conditions across the country. Nearby corn futures prices on the Chicago Board of Trade (CBOT) dropped nearly $1/bu. since early April, while nearby soybean futures prices dropped by over $1/bu. since late April. Local cash prices and new-crop prices at grain elevators and grain processing plants have not dropped as significantly, due to strong local basis levels, which have been maintained by very tight grain supplies, and continued strong short-term demand.
There has been even greater pressure on the 2012 new-crop corn price due the increase in U.S. corn acreage – an estimated 2012 U.S. corn crop of well over 14 billion bushels – and corn carryover levels expected to increase to the largest levels in several years by the end of 2012. On June 15, CBOT December corn futures dropped to $5.11/bu., the lowest level of the year. Local 2012 corn prices dropped to the $4.60-4.70/bu. range, which for some producers is probably approaching their breakeven level to cover all 2012 crop input, land and overhead costs for production. New-crop corn price movements in the coming months will likely be highly dependent on weather conditions and crop prospects in the major corn growing areas of the U.S.
The current break in prices may be a signal for farmers with 2011 corn and soybeans in storage that is not priced to sell remaining grain inventories. The current basis levels for corn are at best levels in recent years. Much of the 2011 grain that is now being delivered to grain elevators and processing plants was priced in 2011, or earlier this year, at price levels well above the current price.
It appears that far less new-crop 2012 corn and soybeans have been forward priced for delivery following harvest, as compared to the past few years. Most farmers are hoping for a market rally into harvest, as we have seen a few times in recent years, and probably looking for corn prices back near $6. However, the increased corn acreage in 2012, along with any favorable weather conditions, may keep that market rally from occurring in 2012. Corn producers may want to watch for any market rallies in the next few weeks to “lock-in” a price on some of their 2012 corn crop. Soybeans may offer better opportunities for a market rally later in the year, due to much tighter U.S. and global supplies of soybeans, and more moderate planted acres in 2012.
Editor’s note: Kent Thiesse is a former University of Minnesota Extension educator and now is Vice President of MinnStar Bank, Lake Crystal, MN. You can contact him at 507-726-2137 or via e-mail at firstname.lastname@example.org.