Bright spot: Some soybean farmers will profit from early contracts
The news sounds dire for soybean growers. A trade war with China has eroded prices, while cold, wet weather is delaying harvest, and the closing of the Ashby elevator has shocked farmers who did business there.
Yet the picture isn't entirely bleak. Not for farmers who locked in their soybean crop for $9 or more per bushel back in May and who will also get a $1.65 per bushel subsidy for half of their crop — and possibly the entire crop — as a subsidy from the federal government to cushion the blow from the trade war.
Between their contracted price and the subsidy, some farmers will end up getting close to $11 per bushel for at least part of their crop.
"It's definitely going to be the haves and have nots this year," said Russ Elliott, president of Douglas County Corn & Soybean Growers. "If you marketed your grain early, it looks really good. We have a good crop. If you weren't proactive in marketing, it could be a little tougher."
The situation is different for every farmer, depending on their situation. Some have more debt, some pay less rent for their land, some spend more on crop inputs like sprays and fertilizer.
In general, though, $9 per bushel is considered a decent price for soybeans, Elliott said. Nothing to dance in the streets over, but a comfortable margin for a farm family. The highest contracted price at the Brandon elevator was $9.60 per bushel last May.
Still, farmers who make a profit this year will likely not be in any rush to spend that money on new equipment, Elliott said.
"I think they're going to be very cautious with investments this year," he said. "I think people are going to be very cautious in investing in farm equipment. ... We've had multiple years of big crops. There's a big world supply of grain, and that seems to be hard on prices."
Last week, the price had fallen to just below $7 per bushel, below the break-even point for many farmers. The poor prices might push some farmers out of the fields, Elliott said.
"I think there are some farmers that are going to retire," he said. "Now we're on our second straight late harvest. It wears on your nerves a little more. There's not a lot of profit and there's the opportunity for retirements this year."
It's unclear just how many farmers will benefit from the high point in soybean prices back in May. After a couple years of poor prices and not-great yields, many didn't lock in because they were waiting for prices to rise.
"They were not excited about it," Elliott said. "The last few years have been financially tough on farmers and the people were hoping for more to help out their balance sheet."
Those who did sign contracts for $9 and up in May probably did not contract their entire crop. That can be risky for farmers, who will have to pay out of pocket to deliver beans if their own crop falls short.
Tim Lauthen, who manages the Pro-Ag elevator in Brandon and is also its grain merchandiser, estimated that farmers who locked into the $9-per-bushel price and higher with Pro-Ag probably did so for about 20 percent of their crop.
Even though the trade war was already looming in May, threatening to derail their major market in China, they held back in case prices went up, Lauthen said.
Instead, China retaliated against President Trump's tariffs and ever since May, prices have been dropping.
Lauthen himself seemed taken aback by how hard the soybean market has been hammered. While Taiwan has agreed to buy up to $1.56 billion in soybeans from Minnesota and Iowa farmers over the next two years, that's a fraction of what China bought in a typical year. The traditional market path to the West Coast and from there to China is greatly reduced, forcing local elevators to ship soybeans to market via the costlier Mississippi River route.
"I didn't think it'd be like this," Lauthen said.
Typically, about 50 to 75 percent of crops are contracted by harvest, Elliott estimated. The rest? Well, nobody seems quite sure what will happen to them. Storage in the area is tight, and Elliott said it appears at least some farmers are hurrying to put up storage bins, based on his conversations with bin builders.
"I've talked to a few bin builders and they're pushing hard to finish. They have a lot to do yet."
This year's harvest also looks to be another bright spot for area farmers. Consistent rain and heat this summer has produced a nice-looking crop.
One of the best soybean yields for area farmers came in 2012, "and it's really close to that," Elliott said. "It's on par with that."