At the end of each year, various publications, websites, etc. have their Top 10 or Top Five lists for this year. In this issue of Focus on Ag, I highlight my top five agricultural topics for 2021, based on issues that have been discussed in columns throughout the year.
My rankings follow.
1. Highest levels of net farm income in the United States since 2013
Based on data from the latest 2021 farm income forecast released by the United States Department of Agriculture’s Economic Research Service in early December, U.S. net farm income is expected to increase by $ 18.4 billion or 18.7 billion. % of 2020 levels. The estimated 2021 net farm income is now estimated at $ 116.8 billion, which would be the highest inflation-adjusted net farm income since the net farm income level adjusted from $ 123.8 billion in 2013.
In the recent Farm Income Report, the USDA estimated total U.S. net cash income for 2021 at $ 133 billion, an increase of $ 17 billion or 14.7% from the year former. Net cash income includes cash receipts from all income related to agriculture, including government payments, less cash expenses for the year. Net farm income is based on accrual accounting, which includes cash income adjustments for inventory changes, depreciation and rental income.
The US net farm income projections for 2021 show a very large improvement over 2020 and are significantly higher than the 2014-2019 farm income levels.
The improvement in net farm income in 2021 was largely due to improved commodity prices for crops and livestock, as well as better than expected crop yields in many regions, and support continuation of the government’s agricultural program. By comparison, the improvement in farm income levels in the United States in 2020 was largely due to the highest level of government farm program payments on record, which included trade disruption payments and COVID-related payments. -19, as well as some traditional farm program payments and disaster payments.
2. Inflation and rapid increase in agricultural input costs
Almost all input costs for crop production will increase in 2022 compared to spending levels in 2021 and other recent years.
Much of the focus has been on rising maize fertilizer costs, which are expected to nearly double in 2022 compared to average fertilizer costs in 2021. Several phosphate and potassium fertilizer products have increased by 15 to 20 % since the end of September, while the cost of anhydrous ammonia, urea and other nitrogenous fertilizer products have increased by about 50% in recent months.
Input costs are also expected to be significantly higher for crop chemicals, diesel fuel, propane, repairs, custom work and labor.
At the end of November, diesel fuel prices were 60% higher than a year earlier, while the cost of some commonly used herbicides was two to three times higher than 12 months ago. The cost of farm equipment has also increased significantly from a year ago, which will likely increase depreciation and other overhead costs for 2022.
The combination of significantly higher farm input costs and an increase in land rental rates will likely put more pressure on breakeven crop price levels for 2022. Using typical farm input spending, other direct costs, average overhead, plus a land rental rate of $ 250 per acre and a target return of $ 50 per acre to the farmer, break-even price on leased acres cash to cover the direct and overhead expenses of corn in 2022 would be around $ 5 to $ 5.50 a bushel. If the spot rental rate increases to $ 300 per acre, the break-even price rises to about $ 5.50 to $ 6 per bushel. This compares to corn break-even points of $ 3.75 to $ 4 a bushel in 2021.
The break-even point for soybeans to cover the cost of production and $ 250 per acre of land rent would be around $ 11.50 to $ 12.50 per bushel, which compares to soybean break-even points of $ 9 to $ 9.50 per acre this year.
3. Cereal prices high for most of 2021
Like most years, the position of farmers in the grain market and the grain marketing decisions made by farmers will have a significant impact on the profit levels of their farming business in 2021.
The corn and soybean markets remained fairly strong for most of 2021, due to increased demand for both domestic uses and for export markets, particularly to China. The “baseline” level between Chicago Board of Trade prices and local corn and soybean prices has remained extremely tight in many areas of the Upper Midwest due to strong local demand and tight grain supplies. which also improved cereal marketing opportunities during the year.
The spot price offers for “new crop” corn in southern Minnesota were close to $ 4 a bushel in early 2021, before surpassing $ 5 a bushel in late April and staying above that level for the next month. rest of the year. The spot price for corn was over $ 5.50 a bushel at the end of December.
Southern Minnesota’s 2021 “new crop” soy spot bids started the year at $ 10.50 to $ 11 a bushel and topped $ 13 a bushel in May. Prices for locally harvested soybeans were between $ 11.75 and $ 12.50 a bushel, which remains close to year-end soybean price levels.
The USDA currently estimates average farm prices for the 2021-22 marketing year, which ends September 30, 2022, at $ 5.45 per bushel for corn and $ 12.10 per bushel for soybeans. This is slightly higher than the futures price bids currently offered in southern Minnesota.
4. Better than expected crop yields in many areas
Many farmers in southern Minnesota and northern Iowa would rank 2021 crop yields as “better than expected.”
After very favorable plantings and early growing conditions for corn and soybeans, the weather conditions turned very hot and dry from late May to June. Many parts of this region received only 50-75% of the normal growing season precipitation from May 1 to September 30, and much of it occurred after mid-August. However, the combination of excellent planting conditions, drowning-free losses, timely rainfall, and above-normal degree of growth units resulted in average to above average corn and soybean yields for the year. in many parts of the region. Many growers in Illinois, Indiana, and eastern Corn Belt, as well as parts of eastern Iowa, southeastern Minnesota, and southern Wisconsin have obtained some of the their best agricultural yields in 2021.
On the flip side, Mother Nature has not been kind to many growers in North Dakota and South Dakota, as well as parts of western Minnesota and parts of the Upper Midwest, as they experienced the worst drought since 2012, and in some cases the worst drought since 1988. Drought in these areas has resulted in corn and soybean yields 20-30% or more below actual historical production yields. The drought also resulted in very low production of hay and pasture, forcing many cow / calf producers in the region to liquidate part of their cattle herd.
5. Strong increases in land values
Iowa State University recently released the results of the 2021 Farmland Survey, which showed that the average value of farmland in Iowa increased 29% from the previous year, reaching a average value of $ 9,751 per acre in December 2021 compared to $ 7,559 per acre in 2020. This is the highest face value of land since the state of Iowa began assessing land values in 1941, exceeding the previous high average price of $ 8,716 per acre in 2013.
The percentage increase in annual land value was the second highest on record, after only a 32.5% increase in 2013.
Recent data from the US Federal Reserve showed annual increases in land values in 2021 of 26% in Minnesota, 23% in South Dakota and 16% in Nebraska, as well as 10% to 15% in Nebraska. Illinois, Indiana and Wisconsin. The 2021 increase in drought-stricken North Dakota was only 4%. The higher land values were largely due to improved crop profitability, higher payment levels from farm programs, low interest rates, and rapidly rising trends in inflation in the states. -United.
For more information, contact Kent Thiesse, Farm Management Analyst and Senior Vice President, MinnStar Bank, Lake Crystal, Minnesota, at 507-381-7960 or [email protected]