It has been a volatile year in the grain markets. As Grant details in another article in this newsletter, there are many causes for this volatility. As always at this time of year, however, weather takes center stage. Our growing season started out on a good note. With limited rainfall, planting was able to progress quickly. Many farm operators commented on soil conditions at planting being some of the best they had ever seen. Early April saw some planting but the majority of corn in the area was planted by the end of April, with soybeans following closely behind and finishing in early May. In general we had less rain than normal in May, but we did receive enough to get the crops off to a good start. It was a little cooler than normal, which slowed early development. A frost on Memorial Day weekend caused some damage and even some limited replanting of soybean fields in eastern portions of our territory. No-till fields took the brunt of the damage due to less heat held in the soils vs black, tilled fields.
The land market remains red hot through early spring and summer months. Pent-up demand from farmers and investors coupled with limited amount of farmland available in certain areas continues to push farmland values substantially higher. We looked at results of “cropland only” land sales from the first of the year into mid-June. These were 85% or more tillable with no substantial building improvements within our trade territory. There were 83 sales which met this criteria. Of those sold so far this year, 70% sold for over $10,000 per acre and 38% sold for over $12,000 per acre. In the last several weeks we have seen market-toppers of $17,200 per acre in O’Brien County, $16,200 per acre in Carroll County, and $15,500 per acre in Kossuth County.
Unexpected is probably the best word to describe what grain prices have done over the last 9 months. Dennis Reyman did a great job of laying out the reasons for the beginning of the grain rally in the Spring edition of this newsletter going all the way back to before the Covid setbacks. At that time, cash bids for October delivery of corn and soybeans were $4.40 and $11.60 respectively.
The idea of trading carbon credits is nothing new, it actually goes back more than 20 years. But a recent climate push from the Biden administration is spurring more interest in carbon credits. President Joe Biden called for the establishment of a carbon bank that would pay farmers to store carbon in the soil. Companies like Microsoft, General Motors, and Delta Airlines use carbon credits to reach their emissions targets. Many large companies are vowing to reach “net-zero emissions” by a stated year.
Admittedly, the past several years in agriculture have led to some complacency. Mostly good crops resulted in quiet markets. From mid-2014 to mid-2020 corn prices essentially traded in a $1.00/ bu. range, and soybeans in a $2.00/bu. range. Cash rents have remained relatively steady during the same time period. By comparison, since August of last year, corn has increased over $3.00/bu. and soybeans over $6.00/bu. Are these higher prices here to stay? No one knows. Weather, exports, bio fuel policy, and livestock production are all factors that will play a part in determining prices going forward. One thing that is certain is that costs of producing a crop will move higher along with crop prices. We have seen healthy increases in fertilizer prices already, and expect chemical and seed prices to move up as well.
