Low crop prices could spell tougher times for Minnesota farmers

For southern Minnesota farmer Michael Wojahn, early November typically brings the sense of celebration that comes with a finished harvest.

Already, he has sold some of this year's corn and soybeans. But the majority of the crops — about 50,000 bushels — are safely tucked away in a cluster of shiny silver grain bins.

But while Wojahn is happy to be done with the long hours in the field on the combine, he's a little disappointed in his yields. Late spring planting, heavy June rains and a September frost all hurt the crops. Soybeans especially fell short of expectations.

"I'm looking at about 37 bushels to the acre," said Wojahn, who farms in Cottonwood County.

That's about 8 bushels below what he usually sees, a yield that is especially difficult to take this year because a big U.S. harvest has pushed soybean and corn prices lower. As a result, the economic future for Minnesota farmers is cloudy.

Contrary to the national trend, Minnesota yields were below expectations in some parts of the state. But with low grain prices, farmers are already thinking about how they can cut costs for next year.

Unless things improve, many Minnesota farmers will lose money on their crops.

Wojahn is an exception. Largely because he has little debt, he thinks he'll be able to squeeze a small profit out of this year's harvest. But he said he'll still feel the pinch of the low grain prices.

"I can pay my bills on the farm, but what it's coming down to is how well my family can eat," Wojahn said. "What we can do with what we're getting in."

Like many farmers, Wojahn has stored much of his crop. There's always a chance that a weather problem somewhere in the world will reduce yields and boost prices. If that happens, the stored grain that's currently a money loser could quickly turn into a profitable commodity.

Crop prices took a small step in that direction over the last month, MinnStar Bank farm management analyst Kent Thiesse said.

"Kind of unexpectedly, at least to a lot of folks, those prices rose during the month of October," said Thiesse, vice president of MinnStar Bank in Lake Crystal, Minnesota.

Corn and soybean prices both rose more than 10 percent. But in a year of disappointments, even that bit of good news inflicted a disappointing twist.

Thiesse said the price jump probably will reduce the per acre revenue insurance payment many farmers are expecting. That's because the payment is based on October prices. He said corn will be hit hardest, where the per-acre payment could drop more than 20 percent.

"From that aspect, the price rise probably, in the bottom line as far as financially, will probably end up hurting them," he said.

With the harvest done, farmers will turn their attention towards next year, and Thiesse said they should plan on spending a lot of time this winter investigating ways to cut costs.

Among the biggest items are land costs. Thiesse, who expects many farmers will try to negotiate lower land rental prices, said they also should look for ways to cut their input costs, especially on high ticket items like seed and fertilizer. Family living expenses also will be on the table.

"It's just good for farm operators to go through line by line and see if there's places they can kind of fine-tune their costs of operation a little bit," Thiesse said.

The downturn in grain prices does actually benefit some segments of the agricultural economy, mainly livestock producers who've seen their feed costs slashed.

But for corn and soybean farmers, the low prices mean tough times ahead. Still, aggressively cutting costs could be especially beneficial if the low grain prices persist, as is likely, Minnesota Corn Growers Association President Bruce Peterson said.

"Barring any major weather problems in South America or in the United States, we're probably looking at kind of the same situation a year from now, unfortunately," Peterson said.