Corn was the star of Upper Midwest ag, but plunging prices have removed luster
You might think Tim Courneya is pleased that area farmers are interested in planting more dry edible beans this spring. After all, he’s executive vice president of the Frazee, Minn., Northarvest Bean Growers Association, North America’s largest supplier of dry beans.
But he’s ambivalent about the possibility.
“Well, there’s both good and bad,” he says.
The good: more acres should mean a more reliable supply for dry bean buyers.
The bad: too many acres could lead to excess production of the crop, causing dry bean prices to tumble.
“Overproduction is a concern,” he says.
The dry bean situation is part of a major agricultural trend in the Upper Midwest. Sagging crop prices, particularly corn prices, have farmers looking into other crops, including dry beans and other “small-market crops” that normally don’t get much attention.
“Guys are taking a closer look at alternatives,” says Frayne Olson, crop economic and marketing specialist with the North Dakota State University Extension Service.
That’s particularly true in northern North Dakota, western South Dakota, northwest Minnesota and northeast Montana. Farmers there typically grow a wider range of crops than producers to the south and east, who generally focus on corn and soybeans.
For instance, farmers in both Montana and western North Dakota are showing more interest in green peas, says Justin Flaten, with JM Grain, which has offices in Great Falls, Mont., and Garrison, N.D.
Durum acres could rally, too, says Doug Opland, a Des Lac, N.D., farmer and president of the U.S. Durum Growers Association.
Olson and other experts say the interest in alternatives is good, but only to a point. Demand for many of the options, such as dry beans, is limited, and planting too much of the crop could swamp the market with excess production.
Some options, particularly canola and sunflowers, don’t appear to be at risk of overproduction, officials say.
U.S. demand for canola is strong, and farmers almost certainly will plant more of it this spring, says Neil Juhnke, president and chief operating officer of Fargo, N.D.-based Northstar Agri Industries, which operates a canola processing plant in Hallock, Minn.
Relatively attractive prices indicate a favorable supply-and-demand outlook for both oil and confection sunflowers, says John Sandbakken, executive director of the National Sunflower Association in Mandan, N.D.
His organization wants to encourage farmers new to the crop, or who haven’t grown it in a while, to plant it this spring.
“If you’re interested, contact me, and I can pair you up with an experienced grower in your area,” Sandbakken says.
There’s also more interest in soybeans and wheat, which along with corn are the region’s three major crops.
Soybeans are expected to gain acres, particularly in parts of South Dakota and Minnesota where farmers grow corn and soybeans almost exclusively.
In the past few years, high corn prices encouraged farmers to grow corn on corn, planting it on the same field year after year.
This spring, however, some fields that otherwise would be replanted to corn will be planted to soybeans, Keith Alverson says. He farms near Chester, S.D., where corn and soybeans dominate.
Soybeans also could gain acres in areas where they’re rarely grown. The crop’s price has held up relatively well, and soybeans are considered a relatively safe, easy crop to grow.
Matt Flikkema, who farms near Manhattan, Mont., in the southwest part of the state, says several farmers in his area are considering planting soybeans.
“We just haven’t seen soybeans here” because of the climate, he says.
Area wheat officials, including Randy Englund, executive director of the South Dakota Wheat Commission, are optimistic more wheat will be planted this year.
They also say it’s too soon to estimate how big the increase might be.
How much of a hit?
Don’t be too quick, however, to assume that corn acreage will take a big hit this spring.
Kim Swenson, a Lakota, N.D., farmer who’s active in the state Corn Growers Association, says corn acreage likely will decline in the northern part of the state.
But the decline is less likely in parts of southern North Dakota where the crop is well established, he says.
As Swenson and others say, many farmers have invested in equipment and buildings, such as additional grain storage, needed to raise corn. That investment could make producers less willing to scale back on corn.
The world supply-and-demand outlook could change by planting, potentially boosting corn prices and encouraging farmers to grow more of it, Swenson says.
Why corn has lost appeal
The price of just about every crop grown in the Upper Midwest has slumped in the past year. But corn’s decline has been especially steep.
Corn is relatively expensive to raise. The cost of seed and fertilizer, among other things, is substantially higher with corn than most other crops. But corn also yields more than other crops.
When corn prices are high, the value of those additional bushels offsets the higher expenses. When corn prices are low, the value of the additional bushels declines and doesn’t necessarily offset the higher expenses.
Geography plays a role, too.
Northern North Dakota is part of what Olson describes as “a transition zone” for corn. Farmers there grow the crop when the market wants corn and pays a high price for it, but switch to other crops when the market wants less corn and pays a lower price for it.
In contrast, farmers to the south and east generally are locked in to corn, Olson says.
Projections make the point
Estimates from the annual NDSU Extension Projected Crop Budgets illustrate how much lower corn prices affect potential profitability in north-central North Dakota.
In 2014, assuming an average sales price of $4 per bushel, per-acre market income of $368 is projected — barely enough to cover the estimated per-acre expenses of $365.87. A projected per-acre profit of $2.13 is left.
In 2013, assuming an average sales price of $5.57 per bushel, per-acre market income of $501.50 was projected — much more than the estimated per-acre expense of $374.83. A per-acre profit of $126.47 was projected.
In other words, a drop of about $1.50 per bushel takes corn from strong profitability to barely breaking even.
Contrast that with the NDSU projections for soybeans in north-central North Dakota.
In 2013, assuming an average sales price of $12.35 per bushel, per-acre market income of $345.80 and per-acre expenses of $232.26 were projected. That left a projected per-acre profit of $113.43 — good, but less than corn’s projected per-acre profit of $126.47.
In 2014, assuming an average sales price of $10.85 per bushel of soybeans, per-acre market income of $314.65 and per-acre expenses of $232.55 are expected. That leaves a projected per-acre profit of $82.10 — less than the $113.43 per-acre profit projected a year later, but far better than the projected per-acre profit of $2.13 for corn this year.
Price fluctuations and planting conditions this spring, of course, will influence what farmers end up planting. If prices and weather don’t cooperate, small-market crops might not gain as many acres as expected now, experts say.
For now, though, small-market crops hold both appeal and risk.
If you’re interested in planting a small-market crop, “Be careful,” Olson says.
More will be known about planting intentions on March 31, when the U.S. Department of Agriculture’s National Agricultural Statistics Service releases its Prospective Plantings report.
The widely watched report will give USDA’s best guess on how many acres of both large- and small-market crops will be planted this spring.