U.S. crop conditions strong despite some challenging storms | Agriculture Insights | Bremer Bank (2024)

As we head toward harvest season, U.S. crop conditions are fairly strong, though heavy and untimely rainstorms in some areas during the late spring and early summer months have presented challenges.

The crop conditions provide optimism that we’ll see solid output in the fall. Wheat production, for instance, is forecast at an eight-year high¹. While this is welcome news, the overall industry picture is complex. Strong future supply estimates are driving a bearish U.S. commodities market, and many commodities have significant short positions as investors expect future prices to drop.

U.S. row crops

Corn crops have made steady progress so far with 88% of the U.S. acreage silking to date, which even with the five-year average. Additionally, 67% of these crops are currently in good or excellent condition, up from 57% last year.

Soybeans are on a similar trajectory overall with 68% of crops in good or excellent shape, which is well above the five-year average of 54%. Across the U.S., 86% of soybeans are blooming, which is up from the five-year average of 84%, and 59% are setting pods, which is up from 56% over the past five years. It’s a different story in our region, however, as excessive moisture in the late spring has hurt crops. Only 65% of Minnesota soybeans and 39% of North Dakota soybeans are setting pods. If yield is not made up later in the year, expect the local price basis to be bullish.

Spring wheat is also doing well with 74% of crops rated good or excellent. That’s a huge jump from last year’s average of 42%. For all U.S. row crops, a particularly hot start to August is worth keeping an eye on, though timely rains have helped curb substantial heat concerns so far this growing season.

U.S. livestock and dairy

Like with row crops, it’s a mixed picture in the U.S. dairy industry. The number of dairy cows continues to dwindle: there were 26,290 herds across the country at the end of 2023, which is down nearly 63% from 20 years ago. However, milk production is up 33% during the same time period. This of course means that individual cows are producing more milk, and large dairy farms with more than 2,000 head are now the source of 39% of the U.S. supply. High beef prices are fueling dairy worker retirements lately as well.

The industry also continues to grapple with bird flu. Through the end of July, 175 livestock herds in 13 states have confirmed cases, according to the USDA². The Centers for Disease Control and Prevention (CDC) reports that there have been 13 human cases since April, with four of those cases associated with exposure to sick dairy cows and the rest linked to infected poultry³. In response to the outbreak, the CDC has committed to buying seasonal flu shots for farmworkers to reduce the chance of them getting infected with both viruses, which can carry additional health risks⁴.

Local ag outlook

Ryan Zerface, Ag Banker, Lisbon, ND

Farmers in our area are optimistic about the potential for decent yields overall. There is variability in some of the corn fields, but crops have been coming along with recent heat and adequate moisture.

The biggest concern right now would be the struggling commodity prices, which are considerably lower than the same time last year. It is going to take an above-average yield to accomplish positive cash flow margins in 2024.

The new soybean crushing plant in Casselton, ND, is reportedly going to start taking bushels this fall. It is about 45 minutes from our branch, but it will be interesting to see how the crushing facility opening will affect the local elevator’s basis price on soybean contracts going forward.

These are the best cattle prices some farmers and ranchers have ever seen. Our grain and cattle producers will significantly benefit from the cattle margins, which will most likely be needed to aid in the very thin projected margins we are seeing for grain farming.

Global agriculture

Across the world, current conditions are generally favorable, and any U.S. production shortcomings would likely be offset by relatively strong crops in South America.

That includes a positive start in Brazil, where the second corn crop harvest of the year is two to three weeks ahead of the five-year average. However, the country also recently reported an outbreak of the Newcastle virus in poultry flocks for the first time since 2006. Brazilian officials enacted an export ban in response, though it has already been lifted as virus concerns have subsided. Brazil is the largest chicken exporter in the world with 40% market share.

What to watch for

There are a number of issues for ag operators to monitor the rest of this year, including input costs for the 2024 harvest and 2025 crop year. With commodity prices trending downward, operators will be looking for retailer deals and incentives to help keep input costs in check. Helping matters is the price of diesel fuel in the U.S., which hit a two-year low in June at an average of $3.72 per gallon, a 36% decrease from the 2022 peak. Lower diesel prices make farm equipment less expensive to operate.

The U.S. government is also working to provide guidance on the 45Z Clean Fuel Production Credit. The Inflation Reduction Act created the credit, which is set to take effect in 2025 in an effort to spur American biofuel production. Several open questions remain, including whether biofuels that use imported feedstocks should qualify for the credit. A bipartisan group of 15 senators from the Midwest recently wrote a letter in opposition to this idea, saying only biofuels created from domestic feedstocks should be eligible.

We will continue to watch this issue closely, as the final rules may impact U.S. ag producers and processors. Additionally, it remains important to keep an eye on any major changes to crop conditions or the export markets. Connect with an experienced ag banker if you have questions specific to your operation.