This is the second of a two-part article highlighting what happened agriculturally in 2015. Last week’s article provided a review of 2015 crop production and weather conditions. This week we will focus on some highlights regarding the avian flu virus outbreak, livestock production, input costs, and grain prices for 2015 ……

Avian Flu Virus Outbreak

Most likely, one of the top agriculture stories for the year in the Upper Midwest will be the sudden and deadly outbreak of the H5N2 virus, or avian flu virus (“bird flu”) in the Spring of 2015. There were a total of 219 cases of avian flu in 15 States reported in the U.S from late December, 2014 until mid-June, 2015, resulting in a loss of over 48 million birds nationwide. The States of Minnesota and Iowa were hit particularly hard by the avian flu outbreak, accounting for approximately 80 percent of the total reported cases, and 85 percent of the total birds lost.

Minnesota had a total of 101 cases of the avian flu virus from early March until early-June in 2015, resulting in the loss of nearly 9 million birds, with the turkey industry being hit very hard. Minnesota is the largest turkey producing State in the nation. Central Minnesota was hit particularly hard, with 73 cases of avian flu in the counties of Kandiyohi, Stearns, Meeker, Swift, and Renville. The outbreak also affected the supply of turkeys at some locations, as well as resulting in work slowdowns at some processing plants. Fortunately, there have been no new cases of the H5N2 virus reported in Minnesota since June 5, 2015, and most turkey production facilities are back operating at capacity by year-end.

In Iowa, it was the egg laying industry that was devastated by the avian flu outbreak. There were 75 cases reported in Iowa from mid-April until mid-June, resulting in the loss of 31.7 million birds, primarily laying hens. This affected processing plants and egg supplies, resulting in localized increases in retail egg prices. The procedures to return the egg laying industry back to full production is a much longer process than in the turkey industry. The good news is that the Iowa egg laying flocks are re-populating, and there have been no new cases of the avian flu virus in Iowa since June 17, 2015.

The severe outbreak of the avian flu virus resulted in all live poultry exhibitions at County Fairs and the State Fairs in Minnesota and Iowa being cancelled in 2015. State Fairs and some County Fairs held very creative poultry events, without live birds, as an alternative to the normal 4-H poultry shows. Minnesota lifted the ban on live Poultry exhibitions late in 2015. Most egg laying operations, turkey facilities, and other poultry producers have significantly increased on-farm biosecurity measures to help prevent future avian flu outbreaks. As we head into 2016, the poultry industries of Minnesota and Iowa will again be on the watch for another potential occurrence of the H5N2 virus.

Other Livestock Production

A continual pattern of low profit margins in recent months is significantly impacting hog, beef, and dairy producers as we end 2015. Farrow-to-finish hog producers continued to see modest profit margins through the first three quarters of 2015; however, profit margins declined later in the year. Wean-to-finish profit margins were negative throughout most of 2015; however, low feed costs have helped keep production costs fairly low. According to Iowa State University, the current total cost to take a hog from weaning to market weight is about $68.00 per cwt. of lean carcass weight, which compares to a current market hog price of less than $60.00 per hundredweight (cwt.), or less than $45.00 per cwt. on a live weight basis. By comparison lean hog prices were in a range of $70.00-$85.00 per cwt. throughout much of 2014.

2015 started the year with some profitability in the cattle feeding industry, but ended the year with very negative profit margins. Total production costs for finishing cattle remained relatively high throughout the year, due to high feeder calf costs earlier in the year, which has resulted in negative cattle feedlot margins of as much as $300 to $500 per head by year-end. Fed cattle market prices have dropped to near $120 per cwt. by the end of the year, compared to $160 per cwt. in April and May, 2015. Similarly, profit margins for beef cow/calf producers have also gotten much tighter during 2015, with the current price for 500-600 pound calves below $150 per cwt. at most locations, compared to over $250 per cwt. earlier in the year. Dairy producers have also experienced negative profit margins throughout much of 2015, with the current average milk price near $15.00 per cwt. at many locations. The breakeven level for most dairy producers is probably above $18.00 per cwt. of milk produced.

Input Costs

Crop input costs in 2015 were slightly lower than 2014 levels in most instances, with fairly steady seed and chemical costs, and slightly lower fertilizer and fuel costs. Crop input costs are expected to remain fairly steady again for the 2016 crop year. Corn drying costs in 2015 were quite low in the Upper Midwest, due to the favorable growing season and the ideal Fall harvest weather. Land rental rates in most areas of the Upper Midwest were steady to slightly lower in 2015; however, many average land rental rates were higher than breakeven levels for crop producers in 2015. Feed costs for livestock producers moderated significantly in the second half 2014, and dropped even lower during 2015. Agriculture interest rates, both for operating loans and longer term loans, remained quite low in 2015; however, there may be slight adjustment upward in 2016, now that the Federal Reserve has made a modest increase to the prime interest rate, which is used to set local interest rates.

Grain Prices

Local cash grain prices in Southern Minnesota started 2015 at about $3.70-$3.80 per bushel for corn, and from $$9.50-10.00 per bushel for soybeans. Local cash prices dropped to near $3.30 per bushel for corn, and below $9.00 per bushel for soybeans, by August of this past year. Regional cash grain prices are near $3.40-$3.50 per bushel for corn, and $8.00-$8.30 per bushel for soybeans, as we end 2015. New crop prices for the Fall of 2016 at local grain markets are very close to the current cash prices for both corn and soybeans. Breakeven grain prices in Southern Minnesota for the 2016 crop year, based on average crop yields, input costs, and land expense are expected to be near $4.00 per bushel for corn and over $9.50 per bushel for soybeans.

Note — For additional information contact Kent Thiesse, Farm Management Analyst and Vice President, MinnStar Bank, Lake Crystal, Minnesota. Phone: (507) 381-7960); Email: kent.thiesse@minnstarbank.com; Web Site: www.minnstarbank.com