Top S.D. Crops in 2017: Every Bushel Matters. Every Penny Counts. Back »

It seems this year will be another challenging one for agriculture in South Dakota and the nation overall. In reality it might not be strikingly different from the three previous ones albeit with maybe somewhat tighter margins. US agriculture is increasingly dependent on global markets, and the success or not of their own agricultural production. The 2016 crop year was a perfect example of this. Adverse weather in Brazil and Argentina resulted in corn and soybean losses during their 2015-2016 season. This prompted higher US prices at planting in 2016, with record acreage for soybeans and a large corn acreage according to the USDA. This, combined with overall good weather during the crop season, resulted in record 2016 corn and soybean yields. Better than average crops with higher productivity and output have been the norm since 2014, building-up commodity stocks and lowering their prices. This trend is projected to continue during the 2017 US crop season.

S.D. Farm Income Trends

South Dakota agriculture started an amazing growth pace during this century being even labeled as an “agriculture powerhouse” in the US. Overall farm income had strong earnings between 2000 and 2013. From 2014 on however, the strengthening of the US dollar combined with highly productive crop seasons reduced commodity prices. Data from the Bureau of Economic Analysis showed that while soybean prices were $1.28 higher ($9.43) compared to a year ago, corn prices at $3.14 were $0.09 lower, and wheat prices about the same at $4.35. Just to give an idea farm income in South Dakota peaked at $3.8 billion in 2011 and dropped to $0.8 billion in 2016! To better understand the current situation, it is important to take a look at what happened during 2016 to the top three revenue-generating agricultural crops: corn, soybeans, and wheat.

Corn

For the northern Great Plains corn production operating costs in 2016 were $285 per planted acre (ERS 2017). Seed and fertilizer at 34% of the total each were the costliest individual items. With average corn sales per acre (157 bushels/acre) of $565 margin over operating costs were $280 per acre. However, when overhead costs (hired labor, opportunity cost of unpaid labor, capital recovery of machinery and equipment, opportunity cost of land, taxes and insurance, and general farm overhead) were factored in, total costs were $569 or a loss of - $4 per acre.


 

Soybeans

Operating costs per acre for soybeans were $138 for a gross value of production $394 (44 bushels/acre) and income over operating costs of $256. Seed was by far the most expensive individual item at 42% of the total operating costs. When overhead costs ($252) were factored in, total costs were $390 or a gain of $4 per acre.


 

Wheat

Wheat (including secondary products of silage, straw, and grazing) operating costs per acre were $107. Of them fertilizer, at 34%, was the most significant by far. With total value of production of $197 per acre, income over operating costs were $90. Total overhead costs were $184 resulting in total costs of $291 and a negative margin of - $94.


 

2017 Outlook

Last season was borderline bad for corn and soybeans, and outright bad for wheat production. Another good season is expected for the top three crops, which will further strengthen their stocks. All this suggests crop farmers will be tight financially, again. According to the USDA FAS it is expected that land values, which usually follow commodity price trends, will suffer a similar fate. Farm net worth, defined as asset value minus debt will likely follow suit, and be down for the third consecutive year. Farm debt-to-asset ratio is forecast to be higher in 2017 at almost record numbers. This year more than ever before calls for only necessary, and prudent investments, and to consider “every bushel matters and every penny counts”.

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