LAKE CRYSTAL, Minn. - After plenty of lean years, farmer Byron Rode is amazed by the prosperity now pulsing through agriculture. So amazed that he literally pinches his arm to make sure he's not dreaming.
"In 31 years of farming, I haven't seen anything like this, ever," said Rode, as he takes a short break from planting corn. "It's too good to be true. And it may not be."
Across the Corn Belt, it is springtime for agriculture. Corn prices are up - way up. So are prices for almost all farm products, lifted by an ethanol boom that just keeps rolling. Farm incomes are setting records. Yields keep rising. Ag businesses are thriving. Land values are climbing.
Even the weather has been wonderful. And yet, given the boom-and-bust history of farming, almost everyone remains a bit wary, wondering when the crash will come, the drought will hit, or the cycle will turn.
"Gee whiz, you gotta be happy with the situation now," said Rode, who like many farmers is planting more corn this spring because the price is so good. "But I think a lot of us are concerned about overreaction."
You hear variations on that theme all over Blue Earth County. Far beyond, too, in a season when practically everyone from the local farmer to agribusiness giants like Cargill and CHS are enjoying record years.
At the John Deere dealership in Mankato, farmers are eager to trade old farm machinery for newer models, but many will have to wait.
"If they want to buy a tractor, we probably wouldn't be able to get it to them until September or October," said Steve Kibble, owner of Mankato Implement. Spending $200,000 for a new tractor seems like an optimistic sign, but many growers are taking no chances. They're using the futures markets to guarantee themselves a profit on their grain, even years from now.
"A lot of these guys are locking in a price, and have sold their crop out for the next three years already," Kibble said.
At Wingert Realty, owner Chuck Wingert said that last year, farmers marveled as prime farmland passed the $4,000-an-acre mark. Now, that threshold is no longer rare. Today, it's $5,000 an acre.
And at the bank in Lake Crystal, vice president Kent Thiesse is happy about the farmers' profits, but fretting about their expenses. Already, he's seeing "some really extreme increases" in land rents, rising costs for seed and fertilizer, and almost every farm expense climbing.
"The fear is, as we've increased the costs, suddenly, what if we don't have the prices?" Thiesse asks. "What if we get low yields?"
A BROAD BOOM
So far, prices are strong. One remarkable aspect of this year's farm boom is how broadly the tide is rising. Minnesota corn prices are up 60 percent from last year, reflecting the explosive ethanol market. Yet wheat prices, too, are up, 22 percent. Hay prices up 36 percent. Milk prices up 40 percent. Hog prices up 16 percent. Egg prices are up 84 percent, according to the U.S. Department of Agriculture.
Costs are up, too, as everyone is paying more for fertilizer, fuel, farm machinery and feed.
That may mean higher food prices down the road. An Iowa State economist forecasts that the ethanol boom will add $50 to everyone's annual grocery bill. The federal government expects food prices to rise 3 percent this year. But for now, the boom is giving Minnesota's agribusiness and food sector a season to remember.
Cargill, the Minnetonka-based agribusiness, just reported the best quarter in its 141-year history.
At CHS, the Inver Grove Heights-based farm and energy cooperative, the six-month results shattered every record.
There are upbeat results, as well, from fertilizer-maker Mosaic, dairy cooperative Land O'Lakes, farm lender AgriBank, meat company Hormel Foods, and food company General Mills.
While no single factor explains the broad prosperity, one comes close: ethanol. The national push to find clean, homegrown and renewable sources of energy has fueled a stampede for corn-based ethanol, which is reverberating across the Corn Belt. The high price of crude oil makes biofuel doubly lucrative.
Already, 117 ethanol plants are in operation across the U.S., including 16 in Minnesota. An additional 86 U.S. plants are under construction, which will double the industry's production to some 12 billion gallons a year. Together, those 200 plants will devour more than 35 percent of the U.S. corn crop, putting unprecedented pressure on the corn supply and those who rely on it: food companies, livestock operators, foreign buyers, and now ethanol makers.
Rode, the Lake Crystal corn grower, is watching the growing competition for corn with a wary eye. At nearly $4 a bushel, he likes today's corn price, he likes the new markets, and he's glad that his investment in ethanol has paid off. But he's also concerned about the effects of high corn prices.
"A lot of us (farmers) are hoping the price stays where it's at, because we can do OK now," he said. "I'm worried about the hog guys, the livestock producers. They have to make money, and we need them, too."
Just west of Lake Crystal sits a 56-million-gallon ethanol plant, newly renamed Poet Biorefining Lake Crystal, that opened in 2005. The plant's timing was perfect, revving up when a bushel of corn was still cheap and ethanol was suddenly pricey.
"When you have $2 corn, and $2 ethanol, it's very hard not to make money," said Scott Austin, the plant manager.
For local growers, the Lake Crystal plant has meant a new customer for their corn, which helped lift the local corn price. It added about 44 jobs to a community of 2,420. It's enriching investors who put up money for the plant. And already, it's making upgrades.
Welders are assembling two huge grain bins that will add 2 million bushels of corn storage. The reason: Plant officials foresee growing competition for corn, and they want to be ready with the flexibility to buy and store the vast amounts they need.
THE RIPPLE EFFECT
Thirty-five miles to the southwest, two colossal ethanol plants are under construction in Martin County. "Because of the size of those plants, that will affect us," Austin said.
Truth is, ripples from the ethanol boom will ultimately affect almost everyone. It's just hitting first in places like Blue Earth County, where the magnitude of the change is a bit unsettling.
Thiesse, the ag banker, has already seen local farmers shy away from buying land, because the soaring price makes them apprehensive. It also revives some bleak memories. In the 1970s, farmland prices soared - only to collapse in the 1980s and drive thousands of Minnesota farmers out of business, especially those who expanded at the wrong time.
"I was around during the '70s and '80s, and I've seen what happens on the downside," warns Steve Taff, an economist and farmland specialist at the University of Minnesota. "People are bullish right now; prices are good." But Taff is already hearing of inflated land rents, along with corn farmers who expect to get 200 bushels an acre (last year's state average was 161) and $3.60 a bushel (which nobody got at harvest time).
Instead of buying land, Thiesse sees cash-rich farmers investing instead in biofuels, new machinery, improving drainage, or adding grain bins. That hardly exempts them from risk, though.
"The wild card is that you're dealing with the petroleum oil complex," he said. "That's really not related to production agriculture."
Still, it's spring, the season of possibility. This year, there's just more optimism to go around.
As Rode prepares to climb aboard his tractor for another pass with the corn planter, he scans the 65-acre field. The soil has warmed. The birds are singing. The smell of earth fills the air.
"The trees are showing it's time to plant," he says.
Then he climbs into the tractor, to put seeds in the ground for another year.
Tom Webb can be reached at twebb@pioneerpress.com orPIONEER PRESS
