Prices, future markets on minds of South Dakota corn growers

Farm Forum

SIOUX FALLS (AP) – South Dakota corn farmers grew a record crop last year, but lower prices and questions about how to expand markets were on their minds during their annual convention in Sioux Falls.

Lisa Richardson, executive director of South Dakota Corn Growers Association and the South Dakota Corn Utilization Council, said high prices after the drought led to a huge decrease in exports, and ethanol companies aren’t building new plants. The China market is ripe for expansion, but it hasn’t opened up enough to have an effect, she said.

Farmers who must decide whether to plant corn or switch to soybeans, oats or small grains need answers to such questions as they make plans for their next crops.

“Is it going to come from exports? Are we going to grow our ethanol industry? Where are we going to get the next billion or 2 billion bushels worth of demand?” Richardson said. “That’s really the unknown question out there right now.”

The annual meeting on Jan. 18 at the Sioux Falls Convention Center also included panels on nutrient management, conservation and sustainability.

Corn, which sold for about $8.20 per bushel in June 2012, was trading at about $4.28 per bushel on Jan. 16 on the Chicago Board of Trade. The previous week, corn dropped to its lowest price in more than 3 years on the announcement of a large increase in ethanol supplies, but rose 5 percent the next day after the U.S. Department of Agriculture cut its estimate for last year’s corn crop.

Whether South Dakota farmers can pull a profit from current prices depends on many factors. Yields in South Dakota vary widely from year to year, and fertilizer, feed and land costs continue to rise, Richardson said.

“Is $4 break even? Not always,” she said. “It totally depends on what your land costs are and it also depends on what your yields are.”

Troy Knecht, a Houghton farmer with about 4,700 acres in a corn-soybean rotation, said South Dakota corn growers typically earn about 40 cents to 50 cents per bushel less than the Chicago price.

Knecht’s not planning any drastic changes for this year’s planting, but potential local prices of about $3.75 per bushel are pushing him to shift slightly toward beans – perhaps a 55 percent soy-45 percent corn mix. He’s hoping that spring weather patterns allow him to get his corn crop planted early so it has the chance to meet its full potential.

“We are kind of going to stay the course, I guess,” Knecht said. “Ideally, we’d like a 50 percent corn-50 percent rotation.

Knecht, who also sells seed, said his customers are expressing similar sentiment. But a few farmers with marginal land told Knecht that they’re planning to shift those acres to soybeans.

South Dakota produced an estimated 809 million bushels of corn in 2013, which is 51 percent more than the year before, according to the National Agricultural Statistics Service.

Richardson said that’s a record harvest, and the state’s average yield of 138 bushels per acre, up 37 bushels from the previous year, was the second largest in South Dakota history.

“Mother Nature was very, very helpful this year,” she said. “Farmers are doing more on those same acres of land.”

A November proposal by the U.S. Environmental Protection Agency to reduce the amount of biofuels required to be blended into gasoline in 2014 by nearly 3 billion gallons is also a major concern for South Dakota farmers.

Richardson said the ethanol industry and those who supply the plants just want expanded market access through the offering of 15 percent blends.

“They want to be able to compete head-on with oil,” she said. “Not subsidized, they just want market access.”