Minnesota farmers are in the best shape in a decade as planting begins.
Coming out of a year that appeared disastrous at first and turned out to be surprisingly profitable, the state's crop farmers have experienced fair weather this spring and are well ahead of schedule planting corn, soybeans and wheat.
Prices for crops also are the highest in nearly a decade, raising the prospect of higher profits this year and greater flexibility on when to schedule sales.
Last week, announcing results from a survey, the Federal Reserve Bank of Minneapolis said farmers in much of the Upper Midwest are experiencing similar good fortune.
"Agricultural conditions are much improved over the last several months," Joe Mahon, an economist at the Minneapolis Fed, said in a webinar on Thursday. "In particular, agricultural income has increased broadly across our region. And the outlook for the second quarter, heading into the crucial phase of the growing season, is pretty optimistic."
Its poll of farm lenders in the region the Minneapolis Fed oversees — which stretches from Montana to the Upper Peninsula of Michigan — showed that farm incomes rose during the last three months of 2020 and first three months of this year.
"Over the last two quarters, we're seeing that percentage jump back up to levels that it was in the last farm boom in the early 2010s, when crop prices were really strong and international demand was really strong," Mahon said.
Capital spending by farmers is now sharply higher than a year ago; household spending was steady. And rising land values — up nearly 7% from a year ago regionwide — helped the overall picture, the survey found.
As a result, bankers in the region are seeing higher rates of loan repayments from farmers and lower rates of new loans.
"The reasons mostly focused on the sustained increase improvement in crop prices for the core commodities produced in our region as well as good yields from 2020 … and the continued government aid that lifted farm balance sheets the last few difficult years," Mahon said.
Starting last August, prices for the two biggest crops, corn and soybeans, broke upward from a trading range they had been stuck in since 2014. Initially, the move was attributed to the effects that a derecho storm in Iowa had on reducing production there.
But gradually, demand from China, one of the largest buyers of U.S. grains, also took off. Demand pressures there, shaped by the need to rebuild a pork industry hard hit by disease, overcame the effects of trade war between the two countries.
Other commodities, ranging from steel to palm oil, also began rising amid perceptions of economic recovery demand as vaccine approvals signaled the coronavirus pandemic would abate.
The bankers surveyed by the Minneapolis Fed said they expect farm income to grow in the current quarter. Beyond that, Mahon noted, "it's anyone's guess how sustained this will be."
Weather, the ultimate variable, is having a new effect on part of the region in which the Minneapolis Fed monitors banking and other economic activity.
In a large part of Montana and western North Dakota, Mahon said, "There are some concerns in some areas about severe, or lingering and growing, drought conditions."