Crop values spike, but diesel costs could limit profit

Farmers are surfing the highs of a corn and soybean price rally last week that boosted crop values to some of the best prices they’ve been at in the last three years.

“It was nice to see a little bump in the markets,” said Jordan Goblish, who farms in the city of Vesta in southwest Minnesota. But he said his local prices haven’t increased much. “Unfortunately, in our area, all the elevators and ethanol plants seem to be full of corn.”

Still, the price spurt is welcome news. However, with diesel prices surging above $6 a gallon, profitability could take a hit. Though, according to University of Minnesota crop economist Ed Usset, those higher costs shouldn’t prevent farmers from making money this harvest.

“Costs are up, so it’s maybe not as profitable as it would have been three years ago, with the current prices,” said Usset. “And yet, [with] higher prices, I think your average Minnesota farmer is feeling a lot better today than they have been for a while.”

Why the price and cost surge?

The latest crop estimates for September show that U.S. supply of corn and soybeans remains tight, making both crops more valuable. Prices for both crops dipped slightly following the report’s release but remain high.

At the same time, China has resumed purchasing soybeans from American markets, helping spur a price rally. The country is among the largest buyers of Minnesota soybeans, though it boycotted the crop last year amid a trade tit-for-tat with the U.S.

The ongoing war between Russia and Ukraine has also boosted grain prices. Ukraine is one of the world’s largest exporters of agricultural products, including corn and wheat. Rising attacks on each country’s export ports have diminished their ability to supply the market.

“That impacts perceived availability of wheat and corn in the international market, and that really ignited things in the corn and wheat markets,” said Usset.

Ukraine’s assault on Russian refineries throughout the war has also diminished oil supplies. That, paired with ongoing energy disruptions in the Strait of Hormuz, has led to high diesel prices at the pump.

For farmers, these increasing costs represent “another leak in the profitability bucket,” according Mike Steenhoek, executive director at the Soy Transportation Coalition.

“You can’t just really curtail the amount of fuel that you consume,” said Steenhoek. “You have to harvest your crop. You have to transport that crop. And machinery that has diesel engines is the way that that occurs.”

Steenhoek adds that farmers’ costs don’t just stop at the diesel they directly consume. The fuel costs that shipping and rail companies absorb could be passed on to customers or farmers, too.

“Those costs are actually getting passed on to the farmer in the form of a lower price,” he said. “So farmers are usually the ones who are disproportionately paying for this. It’s not just the grain handlers who are the shippers’ problem. It’s actually the farmers’ problem.”

Minnesota Farm Bureau President Dan Glessing, who also grows corn, said that while these rising costs do represent a hit to farmers’ expenses, he remains optimistic.

“Quite honestly, the rally will get us to that break-even mark,” said Glessing. “Every farm is different on that break-even mark, but it will be for us. We’ll be at that break-even or a little better. So that has been encouraging, even with the higher fuel prices.”

Redwood County farmer Jordan Goblish also said he’ll likely make a slight profit from the rally.

“Are you gonna live off that? No. I have like three other jobs that I do to cover some of the living expenses, but yeah, everything is just a little outrageous right now. I can’t believe everything’s so high,” said Goblish.

Goblish had already bought enough diesel earlier in the year to last him halfway through harvest. In retrospect, he said the timing made it a good buy. He’s now running out of diesel, which means soon he’ll have to return to the pump.

“So, with that being said, going into fall, we’re going to have a little extra expense with that,” said Goblish.