Despite drought, ag strong

Oct. 18—When area farmers got together or talked on the phone this year, the first and foremost topic was the severe drought.

There was little rain in early spring and June brought a long stretch of historic high temperatures near or above 90 degrees. Through the summer hot weather persisted and rainfall was anywhere from 6 inches to 12 inches or more below the annual average.

While the dry weather has definitely impacted crops, most farmers in the Greater Mankato region are finishing the year with a sense of relief and optimism.

Area crops were helped by high soil moisture during the start of spring and timely, if not heavy, rains helped crops limp along without serious drought damage.

And while area crops were stressed and some had damage, farmers knew their colleagues in much of the state had it worse.

Mapleton farmer Pat Duncanson said crop yields in the region will vary considerably as rains were often spotty.

"It's going to be very neighborhood specific this year. There are some who are going to have pretty good crops and some who won't see too good of a crop." But he and others say strong crop prices will be a saving grace for most farmers.

"You just hope the crop prices hold up so even with lower yields there'll be some decent profits," Duncanson said.

Bob Roelofs, who farms near Garden City and serves on the state Farm Bureau board, said south-central Minnesota was blessed.

"I've traveled the state for Farm Bureau and we have, I think, the best crops in the state. You go even 40 miles southwest and north and it looks really tough. Marshall looks really rough. There are a lot of areas a lot rougher than here," he said.

"I think corn (yields) will be about average and it'll be slightly below average for beans," Roelofs said.

Kent Thiesse, farm management analyst and vice president at MinnStar Bank in Lake Crystal, expects that when harvest is over there will be a wide range of results.

"In our south-central region, it varies a lot as far as impacts from the drought. Some of our eastern areas have minimal effects but in southwestern parts of south-central Minnesota there will be significant reductions in yields," Thiesse said. "There are variations even in the same township or sometimes on the same farm, depending on where rain fell."

Profits strong

Following a few years of lower farm profits, 2020 and 2021 saw improved profitability, and predictions are for continued strength next year.

"2021 for most farmers will be a fairly good year from a profit standpoint. Mostly due to strong prices rather than government payments like last year," Thiesse said. "Crop prices for most of the year have been very strong. Selling the remaining crop left from last year and being able to forward sell this year's crop have given some good opportunities for farmers."

While crop prices were not strong last year, heavy government subsidies boosted farm profits. Those included the traditional Farm Bill payments but also several rounds of funding from COVID-related programs approved by Congress.

While government subsidies will be less this year, the strong crop prices will boost profits.

Thiesse, Roelofs and Duncanson said much of the higher profits will be eaten up by rising input costs late this fall and next spring.

"Input costs rose in 2021 and will probably rise even more in 2022, especially in fertilizer costs," Thiesse said. Fertilizer prices are expected to jump 30-50% next year due to strong global demand and rising shipping costs. There is currently a shortage of shipping containers and higher fuel costs.

There have also been increases in fuel, seed and other inputs for farmers, but not as dramatic as fertilizer costs.

Land costs rising

The cost of farmland has continued to shoot up. That means higher rent rates for farmers who borrow land, but it also improves balance sheets for farmers because of land they own.

"There are a lot of land sales out there and some sales in Iowa are eye popping," Roelofs said. "I think it will stay firm and maybe tick higher. It depends on how much cash farmers have. Some who've been farming a while have some cash to burn."

He noted that a recent sale in Iowa brought $22,600 per acre. "That's incredible. Iowa has always been higher than we are, but it will be interesting to see what happens here. But sometimes when you see those huge numbers, it's just two neighbors who both want to win (the bidding).

"We've been used to $6,000 to $10,000 an acre here, so it'll be interesting to see what happens," Roelofs said.

Livestock uneven

Prices farmers get for raising hogs has been solid, but beef producers have seen low prices.

"Hog prices have held up well," Duncanson said. "It's been pretty strong all summer. Cash prices are in the upper end of the range with lean carcass (prices) in the $90 range."

But beef prices have been very weak, and beef producers face additional costs and hardships because the drought reduced the amount of hay and drove up costs.

"I know a cattle guy by Brainerd who is sending his cattle to Nebraska to feed them temporarily," Roelofs said. "They just don't have the feed stock here. He said he's never had to do that before."

Producers are scrambling to find hay for the winter ahead.

"I've never seen so many gravel ditches baled as I have this year," Roelofs said. "One guy had a third of (the hay) he needed and that's here in our area. They just didn't have enough rain for the hay and alfalfa to take off. And a lot of people out west are coming to Minnesota and buying hay and bringing it out there and driving up prices."

While beef prices for farmers are down, prices for beef have stayed high at the grocery store. That is spurred by a backup at packing plants that mean less beef is processed, keeping store prices high. The backup also means there are more cattle available than can be processed, holding prices down for live cattle.

There are also backups at pork-packing plants, although live hog prices have remained strong.

"The backup at packers was made worse by COVID," Duncanson said. "The backup has gotten really bad. There are only so many packing plants and only so many workers willing to work in them."

The backlog at packing plants also has been affected by new government rules aimed at protecting the safety of packing plant workers. Those rules effectively slow the processing lines at plants.