“With (hay) prices at $200 to $300 per ton, it makes expenses for cattle producers difficult.” —David Kruse President, Commstock Investments

SPENCER – Producers from Iowa and Minnesota attending the Feb. 19 Northwest Iowa Ag Outlook meeting in Spencer were told:

• Expect a price drop for corn due to damaged demand, but a return to $2 per bushel is not likely.

• Northwest Iowa is not expected to get completely out of its drought predicament until the prevailing weather patterns shift to El Nino characteristics.

• The national average corn yield will be below trendline for the fifth consecutive year.

• The next significant price reduction on farmland may not occur until 2041.

• Hay supplies will continue to be short in 2013.

David Kruse, of Commstock Investments, in Royal, said profitability in the ag industry is “off the charts” today, with producers seeing greater profits than they have in the last three decades.

Lingering drought

Kruse said the 2012 drought carryover could see the trend line corn yield below 160 bushels per acre, agreeing with Iowa State University Climatologist Dr. Elwynn Taylor who thinks it could hover around 147 bpa.

“Droughts don’t recover in one year’s time,” Kruse said. “Many areas (at least around the Royal area) saw record yields this year, but it depleted all of the subsoil moisture in the process. We’re in a neutral situation right now, and we need an El Nino weather pattern to bring us some rainfall and cooler temperatures.”

The drought forecast calls for “some improvement” across Iowa and south central Minnesota. —Bryce Anderson Senior meteorologist for DTN

He said he sees some drought improvement throughout the Eastern Corn Belt, but that Northwest Iowa and surrounding areas are “iffy” as far as getting some kind of relief.

Kruse said producers would do well to insure their crops this year, even though, at the moment, agriculture is in “not too bad of a position.”

“Things are stable now,” he said, “but that can change pretty fast. The 2013 crop will be “quite valuable,” Kruse said. “Guaranteed prices for next year are a lot lower, and a safety net against that would be to get a little crop insurance.

“We’re still at levels where it could offer some significant protection.”

The drought could affect forage availability, with hay stocks low, he said. This is on top of prices for beef and pork producers that are already not high enough to cover their expenses.

“It’s a very nervous situation,” he said. ” with (hay) prices at $200 to $300 per ton, it makes expenses for cattle producers difficult.”

Even with the ethanol industry experiencing difficulty, he said, the U.S. is still significantly less dependent on foreign oil. The approval of E-10 gasoline has oil companies doing all they can to fight against the passing of the proposed E-15 gasoline.

“They’re going to do everything they can to not lose that extra 5 percent of the market share,” Kruse said.

Farm land values evolve on 55-year price cycles,” Kruse said, “and prices aren’t going down anytime soon.”

He doesn’t expect the next significant price reduction to occur until at least 2041.

South American crops, he said, are good, but not overwhelming so far, since Argentina’s farmers have also had troubles with both drought and flood conditions.

Kruse said if their new crop comes in and the drought breaks; and if they have a large crop, producers could see price deflation and basis deflation.

Needed: El Nino

Bryce Anderson, senior ag meteorologist with Televent DTN, based in Omaha, Neb., told producers the Midwestern Corn Belt is currently classified as being in “extreme drought conditions.”

The drought was considered severe last growing season, but now that the subsoil moisture is also depleted, conditions are considered to be even worse.

In fact, 98 percent of Nebraska is under the extreme or exceptional drought category.

Anderson said this is the fourth-largest drought in U.S. history, being preceded by the drought of the 1930s, 1950s and 1988 – which he called “the hallmark drought.” Iowa is considered by comparison, as the l1th driest state this year.

He said a change in the jet pattern may have happened too late to help the drought to pass this year. Farmers who irrigate their land will now need to be concerned about having enough water available to do that, as aquifers become more shallow. As it is, last year’s irrigaters put on twice the water as they normally did, with the soil starting out with moisture. This year the soil will not start out with reserve supplies.

Anderson said the drought forecast calls for “some improvement” across Iowa and south central Minnesota, which might bring the drought category ratings from stage 3 (extreme) to stage 2 (severe). Subsoil moisture rankings for Illinois and Indiana are at 50 to 70 percent, he said.

The Mississippi Valley area subsoil moisture comes in at around 20 percent. Northwest Iowa is at 10 percent and Nebraska’s subsoil moisture is estimated at one percent.

The U.S. Palmer Drought Index rates Iowa’s drought severity to be at the “negative four” category.

“There have been 12 times when the U.S. National Palmer Drought Index was at a negative four or under,” said Anderson. “In each time, the minimum length of time it took for that value to get back to zero was 18 months.

“We went to a negative four rating in July of 2012. That means if we apply the 18-month rule, it will be January of 2014 before things improve on a national basis.”

During the drought of the 1950s, Anderson said, it took 47 months to break. The drought of the 1930s took 51 months to get back to a neutral reading.

Anderson said weather maps indicate that temperatures will not be nearly as warm as they were last year, and that temperatures will be key to the way the drought plays out this summer. Rainfall is expected to be normal or below normal.

“The crops are going to need every molecule of moisture they can get,” he said, explaining why cooler temperatures will be important this growing season to both row crops and pasture acres.

“Hay supplies will be about as short this year as they were in the 1970s,” he said.

Anderson said yields have not matched trend lines for the third year in a row. He said in 2012 growers produced 1.88 billion bushels of corn statewide, which is down 21 percent compared to 2011. He said he expects to see more corn-on-corn in the Eastern Corn Belt, with irrigation practices increasing in the Western Corn Belt.

“We need to dream of an El Nino weather pattern,” he said, adding that weather patterns today reflect what they were during the drought of the 1930s. “That’s where we are by comparison today.”

With trend line yields questionable this growing season, Anderson said it will be a “tall order” to get back to $8 cash corn, and feels like the low $6 range would be more applicable looking ahead.

With South American farmers having their own struggles with drought and flooding, it’s anyone’s guess how the crops will turn out there as well, Anderson said.

He added that some Brazilian farmers finished planting their corn late – comparable to Iowa’s August. But he said it will all affect the U.S. markets in some way.

ACEing ag

Wayne Humphreys, an ag humorist, made producers laugh and gave them things to think about after hearing less-than-optimistic speculation during the morning sessions.

Using the acrostic ACE, he said:

• Attitude: That they can do whatever they set their minds to if they have the right attitude.

• Communication: That growers need to communicate with others about their industry and keep themselves informed and keep their spirits up by others who have their same concerns.

• Enthusiasm: Which he said is important in the agricultural industry during days when it’s easy to become discouraged.

Positive thinking, he said, can do wonders.

“Agriculture is one of the driving forces behind the economy, but it’s a tough business because it’s so frustratingly unpredictable,” Humphreys said. ACE application will help producers face the growing season armed with sound mental tools to see them through what could be another drought-ridden year.

Area FFA chapters were recognized during the day for their contributions to their schools and communities.

Receiving the top award was the Clay Central-Everly FFA, which received a plaque and a check for $250.

In second place was the South O’Brien FFA chapter, which received a plaque and $200.

In third place was the Spencer FFA chapter, which received a plaque and $100.

Honorable mentions were given to FFA chapters at Alta-Aurelia, Hartley-Melvin-Sanborn, Okoboji (Milford) and Laurens-Marathon.

The Northwest Iowa Ag Outlook is planned by the ag committee of the Spencer Area Chamber of Commerce, and is sponsored and supported by participating area businesses.