Record yield AND record prices!?!

That was one of the big headlines that I came away with from last month’s Ag Outlook Forum. The annual event on the UW-Madison campus is held in conjunction with the release of the annual “Status of Wisconsin Agriculture” report.

While farmland in much of the rest of the nation was ravaged by drought, floods, tornadoes, or hurricanes last year, things in Wisconsin were by and large coming up roses … and corn, and soybeans, and cranberries … you get the picture. 

One of the big stories was the corn and soybean crop, according to David Moll, a grain marketing outreach specialist. The $6.25 Wisconsin average farm price per bushel of corn in 2011 was a full dollar higher than in 2010. The reason for record prices? Basically, U.S. farmers are producing big crops, but it’s just not keeping up with demand. There were 91.9 million acres of corn planted in the U.S. last year, and Moll predicted we could soon get to 95 million acres.

It could be said that corn and soybeans fight for farmland acreage the way Coke and Pepsi fight for the soda market.

Despite the high-flying corn market, things are bullish for soybeans, too. The demand for soybeans over the last five years has largely come from increased demand from China. Domestically, there is strong demand for soybeans, too. Despite relatively fewer acres (due to the big corn crop) of soybeans, the strong yields of about 46 bushels per acre helped account for 2011’s big soybean crop. 

The weak U.S. dollar (compared to other currencies), coupled with demand from the ethanol market and China have created a perfect storm for the grain markets. Moll said the real unknown going forward is the value of the U.S. dollar. Any number of factors from the economic uncertainty in Europe to political unrest in the Middle East could spell big trouble for American farmers in 2012.

You cannot really talk about corn without mentioning ethanol. Moll confirmed that corn usage for ethanol continues to grow, but at a lesser rate as the U.S. gets closer to its 15 million gallon biofuel mandate.

"We've had great times, but realistically we are going to see those margins tightening," Moll cautioned.

What does he mean? The costs of growing corn and soybeans (the “inputs” as we like to call them on the farm) – whether it be land rent, seed, fertilizer, diesel, etc. – are all on a steady climb, too.

While Wisconsin’s corn and soybean growers had a great 2011, there are some storm clouds on the horizon of 2012’s growing season.

Missed the Ag Outlook Forum on the UW-Madison campus? No problem … you can watch video from the event by clicking here