Plentiful rains this summer have been great for the yields of corn and soybeans across southeast Minnesota. Bumper crops are expected and you might think that is good news for farmers.
Not necessarily. Another factor is the price that those crops will fetch, and there is bad news on that front.
"Last year for example, the corn price was about a dollar more than it is now, it was $3.83 average sale price last year. Right now, it's about $2.80 for delivery to our local elevators in the fall. Bean prices are about 71 cents a bushel lower now than they were a year ago. That is the problem, the price decrease more than offsets even these top yields and that's what people are looking at," said Riverland Community College Farm Business Management Instructor Wayne Pike.
It comes down to simple economics. When there's lots of supply and not enough demand, prices will suffer.
"Last year was a big crop and it looks like this year is a big crop. So those people who set the prices, who want to own this corn and soybeans, they're thinking ahead and thinking, 'Well, there's going to be a monster supply so let's not buy it now.' Then, the corn price slides down and the bean price goes with it," said Pike.
Controlling costs might be a logical step, but that's hard to do in the modern era.
"Some of these are fixed costs that they can't do very much about. Land rent is a big one, the machinery costs that they still have to keep up with," said Pike.
Although the bottom line will be hurt this year, farming will go on as it always does, in the hope that next year will work out better.
"Coming out in the red is no fun, and nobody wants to do that, but farmers love to farm and that is what they will do. That is what they're doing now and they will keep doing it," said Pike.
Based on remote sensing yield estimates and projected crop prices, producers raising equal amounts of corn and soybeans may expect to gross about $70 per acre less this year than in 2015.
The recent high for corn and soybean prices in southeast Minnesota was $6.13 and $13.26 per bushel respectively in 2012.