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Corn+Soybean Digest

Harvest, Grain Markets, and Soybean Basis

Harvest Underway
The fall corn and soybean harvest is now in full-swing in many portions of southern and western Minnesota. Primary attention is being focused on the soybean harvest, as many soybeans have now reached maturity, and timeliness is very critical to prevent harvest loss. The prospect for wetter weather conditions in the next couple of weeks in the upper Midwest has caused growers to be quite aggressive with soybean harvest in the past week. Early soybean yield reports are predictably quite variable in south-central Minnesota, ranging from less than 40 bu./acre to near 60 bu./acre. Most growers are reporting better-than-expected soybean yields thus far, given the extremely dry weather pattern that existed in many areas from late June until early August. On the whole, 2007 soybean yields in south-central Minnesota are slightly below the excellent soybean yields of 2006, but above most 2005 soybean yields, when soybean aphids and disease problems led to significant yield reductions.

Some farm operators in south-central Minnesota have also harvested some early corn; however, most producers have been letting the corn dry down naturally in the field before harvesting in order to reduce corn drying costs. Early corn yield reports in the region are also highly variable, ranging from just above 100 bu./acre to near 200 bu./acre. Overall, 2007 corn yields are expected to be close to or slightly above trend line corn yield averages for the area. However, for many growers, 2007 corn yields are likely to be well below the record corn yield levels achieved in 2005, and the excellent 2006 corn yields in southern Minnesota.

Grain Markets Remain Strong
Cash grain prices in Lake Crystal, MN on Sept. 24 were $3.26/bu. for corn and $8.69/bu. for soybeans, which are some of the best harvest time grain prices ever. By comparison, the cash grain prices at Lake Crystal one year ago on Sept. 25 were $1.99/bu. for corn and $4.80/bu. for soybeans. So, even though corn and soybean yields in many areas of southern Minnesota are somewhat reduced in 2007, as compared to 2006, the gross dollars per acre will likely be higher in 2007, due to the higher harvest-time grain prices. Cash grain prices at Lake Crystal on Sept. 26, 2005 were $1.43/bu. for corn and $5.65/bu. for soybeans. Of course, many producers were able to take advantage of a 45-50¢/bu. loan deficiency payment (LDP) for corn in the fall 2005, which helped offset the low corn prices.

On Sept. 24, prices for July 2008 delivery of grain at Lake Crystal were $3.59/bu. for corn and $9.26/bu. for soybeans. Producers who have on-farm grain storage could gain approximately 30-35¢/bu. for corn, and 50-60¢/bu. for soybeans at current price spreads by storing the 2007 grain after harvest, and pricing it for summer 2008. On Sept. 24, cash grain prices at Lake Crystal for the fall 2008 were $3.64/bu. for corn and $8.63/bu. for soybeans, which provides a nice starting point on grain marketing plans for the 2008 crop.

Soybean Basis is Wide
The basis level, which is the difference between the Chicago Board of Trade (CBOT) futures price and the local grain price bid for a given month, remains quite high for soybeans. On Sept. 24, the current cash market basis at Lake Crystal, MN was $1.06/bu., which is quite high. This compares to a basis of 67¢ in late-September 2006, which is a more typical harvest-time soybean basis in southern Minnesota. Most grain marketing experts feel that the reason for wide soybean basis in 2007 is the high amount of 2006 soybeans that were still in farm storage into late summer 2007, waiting to be delivered and sold.

Ag Secretary Johanns Resigns
U.S. Secretary of Agriculture Mike Johanns resigned last week in order to return to his home state of Nebraska, and possibly pursue a bid for the U.S. Senate in 2008. Current Nebraska U.S. Senator Chuck Hagel has announced that he will retire after his current term, and will not seek re-election in 2008. USDA Deputy Ag Secretary Chuck Conner has been appointed the Acting Ag Secretary by President Bush. This change at USDA is likely to have very little impact on ag policy issues, or the finalization of the new farm bill.

On a personal note, I have enjoyed the opportunity to get to know Ag Secretary Johanns at Farmfest in 2005 and 2007, when he participated in Farmfest Forums. He was not afraid to interact with farm operators and to hear their ideas on future farm policy in the U.S. Whether they agreed with Secretary Johanns or not on ag policy issues, most producers and farm organization groups had a very high degree of respect for Mike Johanns as U.S. Secretary of Agriculture.

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 [email protected].

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