2009 a dicey crop year

FARGO, N.D. -- Only a paltry 1 percent of North Dakota's 2009 corn crop is in the bin, and just 21 percent of the soybeans, so it might seem impossible to assess the economic results from the year.

Nevertheless, lenders are starting to take stock and are girding themselves for 2010.

"We've had two strong years, so that's going to help producers' wherewithal," says Andy Swenson, a North Dakota State University agricultural economist and farm management specialist.

Swenson and several colleagues conducted an annual outlook meeting for ag lenders in four sessions throughout North Dakota. Outlook sessions have been completed in Grand Forks and Minot and will be held this week in Fargo and Bismarck.

Assuming the crop eventually is brought in, ag lenders have been generally optimistic that their clients will make money in the region -- "fair, but not great," one lender has told Agweek.

Farmers have gone through last year's late harvest, which spilled into spring. They're probably not as concerned about the corn as they are about getting the dry edible beans and soybeans off the fields before there is more rain or snow.

Swenson breaks down the situation into two general regions: Red River Valley and nonvalley.

So far, Swenson is looking most closely at three primary crops: wheat, corn and soybeans. Projections are similar for both North Dakota and Minnesota farmers, as estimated within the parameters of adult farm management program enrollees.

Valley's 2009

Swenson says profits for most Red River Valley farmers will be "down substantially" from 2008 and 2007, but that is expected because those two years were seen as anomalies.

"I think in 2009, we're back to what you'd call a typical historical situation, if you ignored what happened in 2007 and 2008," he says.

Wheat is probably a break-even deal, unless prices bump up or protein discounts shrink.

Production costs on wheat on cash-rented land are $300 an acre in the valley, which is down from the $325 in 2008.

That's positive.

Yields are strong, but the price has dropped and still is uncertain.

"Price is such a tough one to handle," Swenson says.

He says 14 protein wheat probably is running in the $5.15- to $5.20-per-bushel range, but there are "hellacious discounts" for low-protein wheat. Wheat at 13 percent probably would run $3.60 per bushel, he says, and many farmers couldn't muster that.

"You hear as low as 10 percent protein or so," he says, adding that, "Unless that price gets up to the $4.50-per-bushel range, it's going to be a break-even deal, even with the bigger yields. It varies from farm to farm. I'm using an average of about 68 bushels per acre, which is just my guess."

Farmers will try to store the wheat, anticipating that protein discounts will dissipate with time.

Soybean profits should be good -- maybe $50 to $60 per acre -- assuming the crop can be harvested, Swenson says. Some farmers forward-contracted at better profits.

"The big question is whether we can get it off the field," Swenson says.

Soybean input costs were similar in 2009 to 2008, which set an all-time high. Seed costs were up substantially, offsetting reductions in other areas -- crop insurance, chemicals (especially glyphosate).

Corn generally is expected to be a financial loser in the Red River Valley in 2009, even assuming the crop is harvested.

"I'd say the losses will be $20, $25 -- maybe $30 an acre," Swenson says.

Costs still were high in 2009, similar to what they were in 2008.

"I'm looking at costs of $475 an acre on cash-rented land, and that includes overhead, but nothing for labor and management," he says. "We don't know what the yield is going to be. Last year, we had a pretty good yield, even though it was wet. I suspect yield will be off some in 2009."

Cash corn prices are running in the $3.25-per-bushel range, so breaking even will be a struggle.

Sugar beet returns are not part of the analysis so far, but Swenson says the crop has seen big increases in input costs in the past few years.

"How an individual farmer does depends a lot on whether he owns or joint-ventures the stock, paying those costs," Swenson says. "I think the guys who own their beet stock, who have a fair amount of equity in it, probably will make some money. But it looks to me that the profit in beets is going to be down."

In 2008, a farmer with joint-ventured stock and cash-rented land made about $40 an acre, while farmers with owned stock and rented land made about $200 an acre.

Swenson says the potential profit on beets obviously is dependent on the final price. His projections so far have been based on beet prices for 2008 crops.

The nonvalley boys

Outside of the Red River Valley, things are similar, but are in some ways, Swenson says.

True, farm income likely will be down from the past two years, but things in the wider region look more positive for wheat, simply because yields were so much better than is typical.

"Percentagewise, yields weren't as phenomenal in the valley as they were out-state, which was pretty crazy," Swenson says.

The sheer volume of the small grains crop will help on wheat and durum wheat, but price has taken a big hit.

Feed barley prices are in the $1.40-per-bushel range, and companies aren't offering malting barley bids. That compares with malting contracts of $6 to $7 per bushel in the past two years.

"A record crop, but the price has really evaporated on barley," Swenson says.

Canola producers had tremendous yields, in the 1,900-pounds-per-acre range, which shattered previous records.

"It'll be a profitable year for canola growers, but there is only about a million acres in North Dakota, mostly in the north-central area," Swenson says.

Soybeans likely will be profitable, as in the valley.

Sunflower profits will be "down substantially," unless crops were contracted at higher levels earlier in the growing season.

"I think, outside of the valley, if we get the rest of the crop in, historically it's going to be a decent year," Swenson says. "But it's just going to be down from the past two years. If you compare it to 2002 to 2006, it'll probably be a decent year, compared to that."