■ Agribusiness trends

Agriculture/

Agribusiness

10 20 8 16 6 12 4 8 2 4 0 DNOSAJJMAMFJ 0

Iowa-Minnesota hog prices

150 30 125 26 100 22 75 18 50 14 25 DNOSAJJMAMFJ 10

Source: USDA

Corn prices — southern Minnesota Source: USDA

185 pound carcass, — 2021 — 2022 negotiated price, weighted average $91.40 $62.09

(dollars per bushel)

— 2021 — 2022

10 20 8 $6.66 16 6 12 4 8

$5.68

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Soybean prices — southern Minnesota

10 150 20 30 8 125 16 26 6 100 12 22 4 75 8 18 2 50 4 14 0 DNOSAJJMAMFJ 25 DNOSAJJMAMFJ 0 DNOSAJJMAMFJ Source: USDA 10 10 20 150 1630 6 125 1226 4 100 8 22 2 75 4 18 0 50 DNOSAJJMAMFJ 0 14 DNOSAJJMAMFJ 25 DNOSAJJMAMFJ 10 DNOSAJJMAMFJ

Milk prices — 2021 — 2022 Minimum prices, class 1 milk Dollars per hundredweight

150 30 $26.51 125 26 100 22 75 18 50 14

$16.36

25 DNOSAJJMAMFJ 10 DNOSAJJMAMFJ

and increasing land rental rates is likely to put more pressure on crop breakeven prices for 2023. Using typical crop input expenses and average overhead expenses, together with a land rental rate of $275 per acre and a targeted return to the farm operator of $50 per acre, the breakeven price to cover direct and overhead expenses for corn in 2022 would be approximately $5.25-$5.50 per bushel, using a 2023 corn yield of 200 bushels per acre. If the cash rental rate increases to $325 per acre, the breakeven price jumps to about $5.50 to $6.00perbushel.Thiscomparestoestimatedbreakeven levels near $4.00 per bushel in 2021 and near $5.00 per bushel in 2022. The estimated 2023 breakeven soybean price for most producers to cover the cost of production in will likely be in the $12.50 to $13.00 per bushel range at yield of 60 bushels per acre.

Based on the monthly World Supply and Demand (WASDE) Report in September, USDA is estimating the U.S. average corn price for the 2022-23 year (2022 crop) at $6.75 per bushel and the average 2022-23 soybean price at $14.35 per bushel. Local crop price bids in South Central Minnesota in early October of 2022 for the Fall of 2023 at local ethanol and processing plants were near $5.75 per bushel for corn and $13.10 per bushel for soybeans (2023 crop year). Many farm operators are quite optimistic about crop prices going into — 2021 — 2022 (dollars per bushel) 2023; however, commodity prices have been highly volatile in $13.39 the past couple of years.

The data in the adjoining chart is based on actual data from the SCC Farm Business Management program and the University of Minnesota FINBIN program on cash rented $12.51 corn acres in the Southern third of Minnesota (2013-2021). The chart also includes corn estimates for 2022 and projections for the 2023 crop year. The chart takes the average corn direct inputcosts,cashrentcosts,andoverheadexpensesand divides those expenses by the average corn selling price for the year to arrive at how many bushels of corn it took to cover the various expenses, as well as the bushels need to cover all expenses. The net return over all costs would be the farm operator’s “net return to labor and management”. The chart did not include income from crop insurance or government farm 8 program payments into the “bushels needed” calculations; however, that data is included in the “net return over all costs” figure listed at the end of the chart, which accounts for some of the variation in “net return” that is not reflected in the yield, price, and expense data.

Based on the FBM data, there was a negative “net return” over all expenses each year from 2013-2018, with less bushels produced than were needed to cover all crop expenses in some years. The farm profits in 2019 were generated by relatively high levels of crop insurance and government payments. From 2020 to 2022, corn producers in Southern Minnesota have benefitted from favorable corn yields and strong commodity prices, together with manageable expenses, to achieve some very solid profit levels. As we look ahead to the 2023 crop year, we are anticipating much higher input costs, increased land rental rates and slightly higher overhead expenses. Based on an average corn price of $6.00 per bushel for the 2023 crop, we are estimating that it will take a corn production level of 184 bushels per acre to cover all expenses, which increases to 221 bushels per acre at a corn price of $5.00 per bushel. By comparison, it took only 149 bushels of corn in 2021 and 145 bushels in 2020 to cover all expenses.

Kent Thiesse is farm management analyst and senior vice president, MinnStar Bank, Lake Crystal. 507-381-7960); kent.thiesse@minnstarbank.com

Source: USDA. Based on federal milk orders.