Low Farm Profitability Highlights Top Ag Topics For 2024

At the end of every year, various publications, websites, etc. have their “Top 10” or “Top 5” list for that year. In this issue of “FOCUS ON AG”, I am highlighting my “Top 5 Ag Topics” for 2024, based on issues that were discussed in the columns throughout the year. Following are my “Top 5 Ag Topics” for 2024:
1. LOW GRAIN PRICES AND TIGHT PROFIT MARGINS IN 2024
As in most years, where farmers were positioned in the grain market and the grain marketing decisions that were made by farm operators will have a big impact on the profit levels for their crop enterprise in 2024. The “basis” level between Chicago Board of Trade (CBOT) prices and local corn and soybean prices has remained fairly tight in many areas of the Upper Midwest due to tight grain supplies, which enhanced grain marketing opportunities for the 2023 crop that was still in storage. Most crop input costs either increased or were steady in 2024 compared to expense levels in previous year; however, fertilizer, fuel, and chemical costs did modify somewhat in 2024. In many areas, land rental rates increased significantly in recent years and remained quite high in 2024, adding to the tighter profit margins. The U.S. Federal Reserve initiated a slight decrease in the prime interest rate this past Fall; however, short-term interest rates for fam operating loans are still above a few years ago. The higher interest rates, together with the need for more operating capital, has resulted in significantly higher interest costs for many farm operators.
The “new crop” corn prices in the upper Midwest did not offer many marketing opportunities during 2024. The “new crop” corn prices in Southern Minnesota started the year near $4.50 per bushel and spent most of the year below that level, ending the year near $4.40 per bushel. 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, many farmers have not “locked-in” a forward price on very much of their 2024 corn crop and are hoping for stronger market prices in early 2025. The 2024 “new crop” soybean price in the region started the year near $11.50 per bushel, before dipping below $10.00 per bushel by July, and ending the year slightly above $9.50 per bushel. Similar to corn, there have been very few pricing opportunities for the 2024 soybean crop, as soybean breakeven costs are near $10.50-$11.00 per bushel for many producers.
2. RECORD RAINFALL AND VARIABLE 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. 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. 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.
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.
3. NO NEW FARM BILL IN 2024
Once again, Congress failed to pass a new Farm Bill in 2024, after the current Farm Bill Extension expired on September 30, 2024. The U.S. House and Senate will likely pass a continuing resolution to provide additional federal funding to avoid a government shutdown at the federal level, which will also likely extend the current Farm Bill for an additional year year through September 30, 2025. This means that the current farm program and crop insurance provisions will remain in place through the 2025 crop year. It also will keep other important federal programs such as the Dairy Margin Coverage (DMC) program, Conservation Reserve Program (CRP), Environmental Quality Incentives Program (EQIP), and other popular USDA programs in place for at least another year. The extension will also keep the current Nutrition Title of the Farm Bill in place for another year.
An extension of the 2018 Farm Bill means that the “price loss coverage” (PLC) and “ag risk coverage” (ARC) farm program options for eligible crops will remain in place for the 2025 crop year and will be similar to PLC and ARC programs for the 2019 to 2024 crop years. The good news for producers for the 2025 crop year is that both reference prices for the PLC program and benchmark prices for the ARC-CO program will increase under provisions of the current Farm Bill. Once a Farm Bill Extension is finalized, the USDA Farm Service Agency (FSA) will provide details regarding 2025 farm program enrollment.
4. RESULTS OF THE 2024 ELECTION
2024 was a major election year nationally, as well as in Minnesota. The Presidential election dominated the national news, with added interest in Minnesota due to Governor Tim Walz being the Democratic Vice Presidential nominee with current Vice President Harris. Of Course, former President Donald Trump, the Republican candidate, was elected President in November, with J.D. Vance as Vice President. The Republican Party also gained a majority in the U.S. Senate for 2025, and maintained a small majority in the U.S. House. The primary focus since the election has been on the Trump nominees to lead various federal departments and agencies for the next four years, as well as what potential policies might be brought forward by the Trump Administration and Congress. The agriculture industry is paying particular attention to passage of a New Farm Bill, energy policy, trade and tariffs, and immigration policy.
The Fall election in Minnesota also ended in a surprise, with the Minnesota House of Representatives now with 67 Democrats and 67 Republicans heading into the 2025 Legislative Session. The “tie-situation” has only occurred once before in Minnesota history, following the 1978 election. The tie means that all the committees in the MN House that hear legislative proposals will have joint chairs. It should be interesting to follow how this situation unfolds in the first few months of 2025. The MN Senate remains at 34 Democrats and 33 Republicans, with Governor Tim Walz continuing in office.
5. SPREAD OF THE H5N1 VIRUS INTO DAIRY CATTLE
The U.S. and Minnesota poultry and turkey industry have dealt with the H5N1 virus (avian flu) for several years, which has resulted in millions of dollars in economic loss to producers. Early in 2025, the avian flu virus re-appeared in poultry and turkey flocks in Minnesota and other States; however, this time around the H5N1 virus also impacted dairy cattle. Since the H5N1 virus was first detected early in March this year, there have been 720 confirmed cases of the virus in dairy cattle in 15 States across the U.S. Fortunately, the H5N1 virus has not impacted on the Minnesota dairy industry as seriously as in some other States. Due to the continued spread of the virus, USDA recently issued a federal order to require nationwide testing of the U.S. milk supply for the H5N1 virus. USDA will be collaborating with State agencies to test raw milk for the virus and to track the movement of infected dairy cattle, in order to slow the spread of the virus. It should be pointed out that pasteurized milk and all processed dairy products are not impacted by the virus and are safe for consumers to eat, drink, and enjoy.
Note - For additional information contact Kent Thiesse, Farm Management Analyst, Green Solutions Phone - (507) 381-7960; E-mail - [email protected]