2016 crop profits aren’t promising

Andy Swenson has studied crop prices and farm profitability for decades. And for many years he’s helped to prepare the annual North Dakota State University Extension Service Projected Crop Budgets, which estimate revenues and costs for selected crops in the coming year.

The outlook for 2016?

“Another lean year,” in some ways even tougher than 2015, says Swenson, NDSU farm management specialist. “The problem continues to be on the revenue side.”

Swenson talked with Agweek about the time the 2016 projected crop budgets were completed. Ron Haugen, also a farm management specialist with NDSU extension, worked on the budgets, too.

Only a handful of crops, primarily small-market or specialty crops such as lentils and mustard, show potential profit in 2016, and only in some parts of the state, Swenson says.

That also was the case for 2015 projections, which generally turned out to be accurate. What’s different with the 2016 projections, however, is that soybeans and dry edible beans - two popular crops in North Dakota that normally are profitable even when other crops aren’t - don’t look promising, financially.

“Soybeans have been kind of the go-to crop when others weren’t profitable. But that doesn’t appear to the case in 2016,” given declining soybean prices, he says.

The same is true of dry edible beans, he says.

Region by region

Swenson and Haugen divide North Dakota into nine separate regions, each of which is given its own yields, costs and projected revenues. Soil and climate vary greatly across North Dakota, influencing what crops are grown and how profitable they can be.

Though the projections are of interest primarily to North Dakota ag producers, they can be useful to western Minnesota, northern South Dakota and eastern Montana farmers who operate adjacent to one of the nine regions and generally grow the same crops.

Two important caveats about the projections:

• They’re educated guesses. Actual 2016 yields, expenses, crop prices and profitability could differ substantially.

• The projections don’t include potential payments from the Agricultural Risk Coverage and Price Loss Coverage programs, the safety-net provisions created by the 2014 farm bill. Those payments, if any, are tied to the crops that farmers planted in the past, not to current crop selection or production. Swenson says ARC and PLC likely will ease some, but not all, of the sting in 2016.

Though generalizations are risky, projections for some crops are brighter in western North Dakota than in the eastern half of the state. Costs tends to be lower in western North Dakota, and the climate there favors some of the crops, such as malting barley and durum, that are projected to do relatively well.

But crops such as malting barley and durum can be risky to grow. Unfavorable weather can hurt their quality, lead to big price discounts, Swenson says.

“So you’ve got to take that in consideration if you’re thinking about growing them,” he says.

Better news on costs, but … The 2016 projections include reductions in some costs, including fuel, fertilizer and crop insurance, Swenson says.

But those positives are more than outweighed by poor crop prices, especially for soybeans and dry edible beans,” he says. “Soybeans, in particular, have become increasingly popular across the state.

“There is some good news on costs. But the revenue side - that’s where the concern comes in.”

To see the projections for 2016 and prior years, visit ag.ndsu.edu/farmmanagement/crop-budget-archive.