Disappointing Crop Profitability In 2024

Ask a farmer what their profit levels from crop farming were in 2024, and many of the answers in the Upper Midwest will likely be something like “worse than anticipated” to “disappointing” to “right down terrible”. Any of those answers could be correct, depending on where the farmer is located and how the heavy rains early in the growing season and the dry weather later in the growing season affected crop production in the area. The other big factor in farm profitability in 2024 was where farmers were positioned in the grain markets during the year, as well as the type and level of crop insurance coverage that was in place on the 2024 crop. Following is a brief overview of how some of these major factors will likely affect final farm profitability in 2024:
• 2024 CROP YIELDS - “Mother nature” was not kind to producers in the areas of the Upper Midwest that were heavily impacted by the excessive rainfall from late May until early July. Portions of Sothern Minnesota and extreme Northern Iowa were especially hard hit. In some cases, the same areas of southern Minnesota and northwest Iowa that had near-record rainfall during June also experienced near-record dryness from mid-August until early October. This impacted final yields for both corn and soybeans in numerous areas. One piece of good news for producers regarding the 2024 corn harvest was the harvest moisture of the corn coming out of the field, which was a cost saving for many farmers. Most of the corn harvested this Fall was under 18 percent moisture, which meant that a large portion of the corn crop could go directly in the bin for storage, without the need for additional drying.
Generally, the reported corn and soybean yields in most areas of the Upper Midwest were highly variable, mainly due to excessive rainfall in some locations early in the growing season and limited rainfall late in the growing season in portions of the region. The 2024 corn and soybean yields in large segments of southern and western Minnesota were not nearly as consistent as the past few years. Corn and soybean yields in 2024 were better and more consistent in much of Iowa, Illinois, Indiana, and other areas of the Eastern Corn Belt that benefitted from more favorable growing conditions.
Differing corn yields in many portions of the Upper Midwest were dependent on corn hybrid selection, planting dates, amount of tile drainage, and the level of excessive rainfall early the growing season. There were some “whole field” corn yield reports of 200 bushels per acre or higher in southern Minnesota and northern Iowa; however, there were also yield reports below 100 bushels per acre at some locations in south central and southwest Minnesota. Overall, many farmers in that region had final 2024 corn yields that were 10-20 percent or more below their crop insurance APH (average) yields.
• GRAIN MARKETING DECISIONS - The “new crop” 2024 corn prices in the upper Midwest did not offer many marketing opportunities, with very little movement during the year. The 2024 “new crop” corn prices in Southern Minnesota started the year near $4.50 per bushel and spent much the first six months between $4.20 and $4.40 per bushel, before dipping below $4.00 per bushel by harvest time. Many crop producers likely had breakeven costs of $5.00-$5.50 per bushel for 2024 at average corn yields on cash rented land. As a result, most farmers were not able to “lock-in” a forward price at a profitable level on their 2024 corn crop. They are now hoping for some post-harvest rallies in the corn market in early 2025. Due to higher interest rates than in recent years, storing grain in 2024-25 is more costly than a few years ago. USDA is currently estimating an average “on-farm” corn price of $4.10 per bushel for the 2024-25 marketing year, which ends on August 31, 2025.
The 2024 “new crop” soybean price in the region started the year near $11.50 per bushel, before dropping throughout the year and ending the year near $9.50 per bushel, with even lower prices at some locations. Following some favorable pricing opportunities for the 2024 soybean crop early in the year, market prices remained below the cost of production for most producers during the second half of 2024. The 2024 cost of production for soybeans on cash rented land is likely near $10.50 to $11.00 per bushel at average yields for many producers. Farmers that took advantage of soybean pricing opportunities early in the year were much more likely to show a small profit for 2024. USDA is currently estimating an average “on-farm” soybean price of $10.80 per bushel for the 2024-25 marketing year; however, prices in the past several weeks have trailed that level.
• 2024 CROP INSURANCE COVERAGE - The crop insurance harvest prices for corn and soybeans were well below the Spring base price levels. The base price is used to determine crop insurance guarantee per acre, while the harvest price is used to determine the harvest value. The lower harvest prices meant that farmers with 85 percent or higher insurance coverage on corn could start collecting 2024 crop insurance indemnity payments at yield levels slightly their average (APH) farm yields for corn and very near APH yields for soybeans. The level and type of crop insurance coverage that a producer carried for the 2024 crop year will impact farm profitability, especially in the areas that had greatly reduced crop yields for the year.
Corn and soybean producers had the option of selecting revenue protection (RP) crop insurance policies ranging from 60% to 95% coverage levels, which can result in some producers receiving large crop insurance indemnity payments others receiving very little or no indemnity payments at the same APH yield and final yields. The 2024 final harvest price for corn was $4.16 per bushel, compared to the Spring base price of $4.66 per bushel. If two farmers both had a 200 bushel per acre APH yield and a 170 bushel per acre actual 2024 corn yield, a farmer with an 85% RP policy would receive an indemnity payment of approximately $85 per acre, while a farmer with a 75% RP policy would receive no indemnity payment.
Corn and soybean producers also had the option of utilizing “enterprise units” or “optional units” for their 2024 crop insurance coverage. Enterprise units usually have a lower premium cost for the same coverage level and combine all acres of a crop in a given county into one crop insurance unit. By comparison, optional units allow producers to insure crops separately in each township section, which can be a big advantage in a year with variable yields, such as 2024. Some farm operators also had buy-up crop insurance coverage for 2024, which may have been beneficial in various locations this past year.
BOTTOM LINE
Corn and soybean producers with average yields could still have a negative profit year in 2024, depending on their level of crop expenses and their grain marketing decisions. Producers with below average to very low crop yields in 2024 will likely have reduced to disastrous profit levels for the year, depending on their crop insurance coverage and grain marketing decisions. Farm operators that are facing serious year-end cash flow shortages are encouraged to consult their farm management advisors and ag lenders sooner than later to look at ways to address the situation. Farmers that will receive large crop insurance indemnity payments for the 2024 crop year should be aware of tax implications and potential audits related to those payments. Many crop producers are now waiting to see if Congress passes a disaster and financial assistance bill that provides some financial relief to offset the losses in 2024.
Note - For additional information contact Kent Thiesse, Farm Management Analyst, Green Solutions Phone - (507) 381-7960; E-mail - [email protected]