Harvest was quite successful for many farmers throughout the U.S. in 2020, in a year filled with surprises. The weather was much less of a factor during 2020 harvest, and yields were strong. Both Minnesota and Wisconsin had record high corn yields, according to USDA, at 202 bushels per acre (bpa) and 184 bpa respectively. Farmers are now turning attention from completed fall field work to wrapping up the 2020 crop year financial work and planning the 2021 crop year.
U.S. row crop
Nearly the entire Corn Belt experienced high yields, apart from Iowa due to the derecho weather event. Row crop prices are continuing a bull run, which is a rarity during harvest. Since November 1, the March corn contract is up 5.2%, January soybeans are up 10.7%, and March wheat is unchanged. A majority of the 2020 crop has already been sold by farmers, which is spurring a rally in local cash prices as well, but many farmers do not have any crop left to sell.
Row crop input prices are projected to slightly decrease in 2021, according to the University of Illinois. Both Ammonia and UAN prices are down approximately 15% year-over-year, according to DTN.
U.S. livestock and dairy
The U.S. will soon engage discussion with Canada regarding the U.S., Mexico, Canada Agreement (USMCA) and specifically the lack of tariff rate quotas, which was a key aspect to help export U.S. dairy products into the Canadian market.
Three million birds have been killed in Japan due to their worst bird flu outbreak on record in the country. Over one quarter of Japan’s prefectures reported bird flu. A second avian flu strain is circulating in Europe and although researchers are not concerned with humans becoming infected by consuming poultry, they are nervous that the virus may mutate and infect humans, according to Reuters.
Ground-level insights from ag bankers
Ryan Grobe, Southeast MN
Rain and snowfall have been sparse since an early accumulation in late October. Local farmers were able to finish their harvest and produce ample bedding and feed inventory for the upcoming year. When we look back to one year ago, we had the opposite with a wet fall harvest. Yields around the area were great this year, including corn averages 220 to 250 bpa and 55 to 65 bpa for soybeans. The dry harvest weather, along with a noticeable increase in price, allowed farmers to sell their soybeans directly from the fields with minimal drying costs. High demand for new crop corn during harvest at local elevators also produced a window for farmers to capture $4 cash prices. Many customers marketed their 2020 crop for spring/summer 2021 delivery; more than we normally see.
2020 looks like an above-average year and farmers are looking into finally upgrading much-needed equipment and machinery. Government payments in 2020 provided much-needed capital for operations to at least hit a break-even point. Moving forward, it will be important to see how much aid is given as the pandemic continues. Crop prices continue to be favorable heading into 2021, along with a low interest rate environment that many customers have taken advantage of. Farmers and business owners experienced an operational year unlike any other. It was a rollercoaster of a year, but we believe our customers will benefit from learning to adapt, and that makes us optimistic moving forward.
Brad Brekken, Northwest MN
We are very dry in our area and most of my customers have not had a significant precipitation event since early-to-mid August. It is hard to believe we dried out, given the wet late spring and occasional heavy summer rains. The lack of subsurface soil moisture is a growing concern. Yields were all over the place this year: Soybeans from 25 to 55 bpa; wheat from 50 to 70 bpa; corn about 150 bpa; and sugar beets anywhere from 22 to 28 ton per acre. Row crops looked good early on, but with the combination of dry weather in late summer and a September frost, crops didn’t develop after mid-August.
If crop prices stay where they are, loan demand will be flat to slightly up compared to 2020, primarily due to some pent-up demand for equipment updating. Many farmers in the area did not upgrade due to low crop prices and a terrible harvest in fall 2019. Increased commodity prices – especially the increased sugar beet payments from American Crystal – as well as a much calmer harvest this past season seem to have reduced the mental anguish that local farmers were dealing with the past few years. If we experience a “normal” spring and maintain the current commodity prices, our area will be OK.
Although the Brazilian soybean crop was late to be planted due to lack of moisture, most of the key growing regions since received much-needed rainfall. The late planting will likely cause delayed growth and harvest, which may then delay a second crop of corn. Additionally, Brazil is forecasted to import 60% more soybeans in 2021 compared to the 500,000 metric tons in 2020, which was a result of the potential for a poor 2021 crop, according to Abiove.
Brazilian farmers are selling their 2021 soybean crop at a record pace, capturing high domestic prices. The 2021 Brazilian soybean crop is already 56.5% forward sold, compared to an average of only 34.5% by early December, according to Safras & Mercado.
Argentina soy-based feed companies’ employees have been striking due to their wages not keeping up with the rate of inflation. Argentina is the largest feed exporter in the world, according to Successful Farming. The strike is affecting the Rosario port, which is the largest ag port in Argentina and accounts for some 80% of all ag exports.
The long-term weather outlooks in South America have been consistently dry, but small localized showers have been able to curb any serious drought conditions for now. Ag commodity prices will be highly correlated to both the short and long-term weather outlooks in South America throughout the next few weeks.
What to watch for
The USDA may see a familiar face back at the helm with President-elect Biden formally introducing former Iowa Governor Tom Vilsack as his nominee for Agriculture Secretary. Mr. Vilsack led the USDA during the Obama Administration and mentioned that one challenge he wants to tackle is systemic racism within USDA programs. Since 2017, Vilsack was President of the U.S. Dairy Export Council. Dairy organizations are relatively pleased with Vilsack returning to the Ag Secretary post.
If U.S. farmers have any crop left to sell, there may be strong localized opportunities given the relatively tight supply of U.S. crops, otherwise farmers will remain busy hauling scheduled deliveries of the 2020 crop throughout winter.
Lastly, the U.S. Dollar is weakening against global currencies, which makes U.S.-sourced commodities more competitive on the global market. Since mid-March, the U.S. Dollar Index is down over 12%.