Farmers impacted by severe drought in southern Minnesota

INTERVIEWER: A big chunk of Southern Minnesota is abnormally dry with the Twin Cities in a severe drought. The lack of rain is a big concern for farmers as is the ongoing Russian invasion of Ukraine, which is creating volatility in agricultural markets.

So we thought it's a good time to check in with Kent Thiesse. He's a Farm Management Analyst and Senior Vice President at MinnStar Bank. And he is always a good guy to talk to when it comes to the farm economy. How are you doing, Kent? Good to have you on board again.

KENT THIESSE: Well, doing great. I heard you talking about the beautiful weather, a beautiful day here in Southern Minnesota. We haven't had many like that this summer. Seems like it's been hot and humid and windy most days, and today is almost perfect.

INTERVIEWER: Well, go out and enjoy it because it's going to go back to being hot, humid, and windy over the weekend into next week evidently, which I'm sure is not going to make farmers all that happy. How is the weather affecting our farmers this summer?

KENT THIESSE: It's really varied all across Southern Minnesota, but really across the whole state. Last year started out very ideal, and then we got dry late in the year, especially Western Minnesota up into Northern Minnesota.

This year has been a little different. We started out planting later than normal, and it got very late planting in parts of West Central and Central Minnesota up in the Northwest Minnesota. And some of those areas that were very dry last year were actually too wet early this year. And really the northern third of the state has had more than adequate moisture most of the year this year and down into parts of Central Minnesota.

But as you mentioned, the Twin Cities area. And if you go from the Twin Cities straight west of the South Dakota border, and then you go south from there and down to about the Southern two tiers of counties in Minnesota, that band of Minnesota has missed a lot of the rainfall here in the last six weeks and tends to be very dry. Now, when you get way down near the Iowa border, kind of the I-90 corridor and up a couple counties in Minnesota, the moisture has been a little more frequent.

Just to give you an example, I follow the weather data at two of the University of Minnesota experiment stations and research centers in Southern Minnesota. And at the Waseca site, which is a little further east and a little further south, they've been fairly close to normal precipitation in the months of June and July. They've had about 9 inches of rainfall and fairly frequently. So they really haven't dried out that much.

On the other side of the coin, out at Lamberton in southwest Minnesota, which is further west and a little further north, they only got a little over an inch of rain total in the month of June, and they've only had an inch and 1/2 of total rainfall in the month of July. And most of that came in a three-day period from the 4th to the 6th of July.

So conditions are certainly a lot different when we get into some of those areas that have just missed the rainfalls. Now, these rainfalls have also been spotty. One location might catch an inch and 1/2 of rain and a few miles away they probably got less than 1/4 inch. And that's just the kind of summer it's been here in the last six weeks as far as rainfall in at least the Southern half of Minnesota.

INTERVIEWER: Yeah. Now I understand looking at the crop report that really the crops are hanging in there, though. I mean, they don't look like-- they there might be a little stress, but they don't look bad at this point.

KENT THIESSE: No, they really are. It's amazing how they have. And I guess one benefit of the extra heat we talked about is it did allow our crops to really catch up even where we plant it later than normal. Again, looking at those research centers, they were running about 10% behind normal growing degree units at the 1st of June from starting May 1.

And since June 1, we're now running about 8 to 10% ahead of normal. So that means not only did we make up what we lost early from the cool, wet weather, we actually went beyond that. And that's certainly helped. Especially where there's no moisture stress, the crops are doing very good.

And I looked back this week in the crop report, we were looking at about 61% rated good to excellent for corn, this is nationwide, and 59% for soybeans. That's just nationwide. We're slightly below last year. We were at 64% good to excellent and 61 a year ago.

But if we look at Minnesota, we're currently at 63% good to excellent in corn and 62 in soybeans. So we're actually running a couple 2 to 3% ahead of the national average. And last year, we were running behind the national average as the drought had set in a lot more intense out in parts of West Central and Northwest Minnesota.

So actually, as you say, we're kind of hanging in there. I'd say we're a good-- we need a couple more timely rainfalls probably in the next two to three weeks here to really determine our crop because there are some areas that are really, as you mentioned, either abnormally dry into a moderate to slight drought.

And certainly the weather forecast for next week with temperatures back in the '90s is going to put a lot of stress on the crops. Both corn and soybeans right now are at their max moisture usage. And in a lot of areas, our stored soil moisture is fairly well depleted. So there's not the reserves we had maybe even a year ago, especially in Southern Minnesota.

INTERVIEWER: So farmers got their fingers crossed, obviously, for a break in the weather. And I'm wondering-- so there's that issue, right? But there's also inflation. And I'm wondering, how is that affecting farmers, given the price that everything they need to produce the crop has gone up?

KENT THIESSE: Well, I think farmers have a lot of concern. The inflation-- we hear about it every day in the news, obviously, and it affects consumers and folks on a day-to-day basis. For farmers, they tend to lock in a lot of their inputs usually starting about now. The inputs for 2023, they probably start about now out until about February or March after the first of the year.

So the inflation impacts for this year's crop didn't impact them as much as it will for next year's crop. So we're looking at fertilizer costs right now to produce corn are about double what they were probably for the 2000-- at least 2021 crop, but even probably at least 50 to 75% higher than it was for 2022 for most farmers.

And in addition, costs for seed, for chemicals, for repairs, labor just about every category you got of input costs for farming have went up. And it isn't just the cost of things, the supply chain issues have also caught up. We saw that happen earlier in the year where we had a lot of severe storms back in May and early June in parts of the state where farmers had damage to grain legs and grain bins.

And in some cases, farmers have not been able to get the steel or the parts to repair those or repair machinery. So some of the big picture issues that are affecting all residents and all consumers also affect agriculture and are affecting agriculture.

INTERVIEWER: So you were visiting with us back in March and we were talking about how the Russian invasion of Ukraine was going to affect regional farming. So how has the war overseas affected prices?

KENT THIESSE: Well, it's kind of interesting. Obviously, early on, it was a positive. But just a couple of weeks ago there, 10 days ago, when it looked like they were going to have a temporary agreement with Russia to maybe allow some of the grain exports to be shipped out of Ukraine, suddenly that was a negative on our markets in the US. And of course, then that didn't come to reality because the Russians didn't follow through and all of a sudden the markets have rebounded.

So what we've really seen happen here just in the last week combination of the dry weather we're talking about, not just in Minnesota, but many parts of the Midwest and the situation with Ukraine, we've seen the price of soybeans jump up over $1 a bushel just in the last week. And we've seen the price of corn jump up $0.50 a bushel.

And so it had been kind of negative because of the crop look like it's going to be a little better than they thought, and then the Ukraine situation and just some other dynamics in the markets. But we're not back to the highs that we had back in late May and to mid-June, but we certainly have rebounded quite a bit here in the last week.

And so the market still pays a lot of attention to what's happening in Ukraine, especially with world grain supplies and what that might look like months down the road after we get through the US harvest this fall.

INTERVIEWER: Say, I got about a minute left here. I know you're going to be at Farmfest, which is coming up next week. You're the farm coordinator this year. There's always something going on at Farmfest.

KENT THIESSE: Well, there is. And I encourage anyone to come out. We're really excited because we have two full days of candidate forums. And of course, this being a big election year. And the Minnesota Governor Candidate Forum is on the middle day, Wednesday, August 3 at 10:30 in the morning. And I believe this will be the first time that Governor Walz and Dr. Scott Jensen have been together on the same format for a forum discussion.

And the first day, at 9:30, we're going to have the first congressional district candidates together in a forum. And then we have the candidates from the second, sixth, seventh, and eighth districts together at 10:30 on August 2 to talk about ag and rural issues.

INTERVIEWER: All right, well, I know some reporters will be down there covering it. Kent, it was good to talk with you again. Thanks much.

KENT THIESSE: You, bet. Let's hope for some cool weather for Farmfest.

INTERVIEWER: [CHUCKLES] I'm not sure if that's going to happen, my friend. Good luck, though. Talk to you later. Bye-bye. Kent Thiesse, Farm Management Analyst and Senior Vice President at MinnStar Bank. Farmfest, by the way, happens, as he mentioned, Tuesday and Wednesday of next week, August 2 and 3.