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This past fall, I routinely got three questions from farmers, whether at seminars or by phone:1. Did you see this shipwreck coming? 2. What can make the markets come back?3. Will it ever get back to normal?The lower grain markets have taken a financial toll on farmers. A couple years ago, farmers bought a lot of equipment to help bring down their tax bill. Now, the same farmers are struggling to pay back operating notes. The toll is personal and emotional.Will it get back to normal? Two years ago, the world had too much corn when prices were at $7 and $8 per bushel; the world will have too little $3 corn one or two years from now. I don’t think $7 corn and $17 soybeans are normal. However, I also don’t think $3 corn and $8 soybeans are normal. Here are the reasons why we had too much corn at $7 or $8 per bushel. End users who were buying corn were losing money. Livestock producers were losing money. Ethanol processors were shutting down or cutting back on the amount of ethanol they would produce. Global livestock feeders were feeding more wheat or any other feedstock they could buy. When corn was over $7 per bushel in the spring of 2013, global corn acres surged. Farmers in Brazil and the Ukraine planted more corn. I watched as landowners on the edge of Minneapolis, Des Moines, and Chicago converted small plots of grassland to corn. Here are the reasons we will have too little $3 corn and $8 soybeans. End users are all making excellent profit margins. Livestock and dairy producers have had a record year. Hog and cattle weights are trending higher, as producers pack on all the extra pounds they can. Ethanol expansion has slowed as we run into the blend wall, but existing processors are going full throttle ahead. What about corn acres in 2015? I look for a 10% to 15% drop in full-season corn acres in Brazil. The political and economic turmoil in the Ukraine has dropped currency to record lows, so Ukrainian farmers are likely to drop acres of corn by 15% to 30% as they plan to lower input costs. I would not be surprised if farmers in North Dakota alone plant 1 million acres less corn in 2015. My early estimate is that U.S. farmers will plant 3 to 5 million acres less corn in 2015. I will be watching the small plots west of Minneapolis and Chicago next spring to see if they are planted to corn or if they go back to grass. The long-term grain cycles I work with project major lows in corn by the fourth quarter of 2014 and a major low in soybeans by the first quarter of 2015. Prices will improve by later this marketing year. However, for many farmers who have not sold anything ahead, it will be a challenge to turn a profit on the 2014 crop. 5 Short-Term Suggestions Here are five short-term suggestions you can use to set your farm up for the most success.1. Know that the outlook for soybean prices to improve in 2015 is not as good as corn. Also, the market is not paying to store soybeans. Once the harvest is wrapped up and basis improves, consider selling your cash soybeans and replacing with call options or call spreads. With the current alignment of the futures market, this is actually less risky than holding cash soybeans. 2. Hold on to as much of your corn as you can into the spring and summer of 2015. I am not very bullish on the corn futures price. However, the combination of a small rally in the futures, the carrying charge in the corn market, and basis improvement can make holding cash corn pay off for most farms, especially farms with their own on-farm storage. 3. Be realistic on your price expectations. Normal is not $7 corn or $15 soybeans. With the current fundamentals, you need to sell a 30¢ rally in corn and the first 50¢ rally in soybeans. 4. Think revenue per acre. For many farms, look at the combination. You will have some crops sold ahead, a lot of bushels left to sell, and a crop insurance check. The dollars per acre will work out for 2014. Set a revenue target. When it is hit, take it. 5. Stay liquid. You may not like the cash price of corn and soybeans right now, but it is still important to sell 3% to 5% of your crop each month to keep cash flow coming into your farm. 2 Long-Term Suggestions Here are two long-term suggestions to improve your situation:1. Look at how you make decisions. If your farm came into this fall without any new crop sold ahead, look at how you make your decisions (and who is making them). For the last several years, farms that just held onto the crop into harvest or put it in the bin till next spring came out just fine. That has changed. 2. Take steps to keep your farm profitable. • Create a long-term strategic plan that includes a written marketing plan. • Choose a team that will create, write, and execute the written marketing plan. • Review your plan monthly and make changes as conditions change. • Create a profit plan for 2015.This will be the toughest year to slug through. By 2016, the long-term grain charts turn higher.
The finish line is just around the corner.Corn and soybean harvest officially entered the homestretch in the last few days -- for many, not quite as soon as they'd prefer on account of the blast winter temperatures and precipitation over the weekend -- and it's likely to wrap up given one more small weather window, farmers and analysts say.Monday's USDA-NASS Crop Progress report shows 89% of the nation's corn and 94% of its soybean crop have been harvested as of Sunday, both about on par with the normal pace for this time of year. Those are 9% and 4% increases over the previous week, within 2% of the previous five-year averages, and near or within previous trade estimates. See more from Monday's report The progress came despite a major shift in weather in much of the nation's center, with temperatures diving well south of normal for this time of year, and snowfall entering the weather lexicon for the first time since spring."Snow fell across a wide swath of the upper Midwest over the weekend with most quantities fairly limited. While that will provide a nuisance for the balance of the harvest, we should see the bean harvest reach the 95%+ status on the reports later today and corn between 85% and 90%," says market analyst Dan Hueber of The Hueber Report and the Center for Agriculture in Sycamore, Illinois. "Realistically for the market, harvest is pretty well wrapped up."Looking ahead, forecasters say although there won't be the most comfortable conditions for running the combine, farmers should be able to make decent progress wrapping up the last 10% of their corn and soybeans, according to Matt Christy, meteorologist with Freese-Notis Weather, Inc. Though temperatures will be sharply lower than normal, precipitation will be on the light side, too, through the week in the Plains and Corn Belt, which should allow the harvest finish line to get even closer."Temperatures will be much below normal [in the Corn Belt]. Precipitation will be below normal, except near normal far east. The rest of the week will be pretty dry, with frequent lake effect snow showers and a couple shots of flurries in the northwestern Corn Belt. Another system will move into the southern Corn Belt Friday night. Total snowfall will be 2 to 4 inches in Indiana, Ohio, and southern Michigan. Highs Monday and Tuesday will be mainly in the teens to 20s. Highs Wednesday will be in the teens to low 40s. Highs Thursday and Friday will be in the teens to 30s," Christy says. "Temperatures mainly will be much below normal [in the Plains]. Precipitation will be below normal everywhere except near normal in the southwestern Plains. Other than scattered flurries in the northern Plains, the only real chance of precipitation will be late Thursday to Friday, where .1 to .25 inches of rain will fall over the southeastern Plains. Highs Tuesday will be in the teens to 40s in the northern Plains and in the 30s to 50s in the southern Plains. Highs Wednesday will be in the teens to 30s in the northern Plains and in the 30s to near 60 in the southern Plains. Highs Thursday and Friday will be in the teens to 40s in the northern Plains and in the 40s to 60s in the southern Plains."See more on the weather
Questions Still Swirling Around 2014 Corn, Soybean Acreage DataRecent USDA reports have left some unresolved questions about the magnitude of planted and harvested acreage of corn and soybeans in 2014. The questions stem from the large differences between the planted acreage estimates from the National Agricultural Statistics Service (NASS) in the November 10 Crop Production report and the planted acreage that has been reported to the Farm Service Agency (FSA) as reflected in the report released on November 13.The NASS estimate of planted acreage is survey based while FSA acreage data are self-reported by producers. As stated at the FSA website, "Farm Service Agency policy requires that producers participating in several programs submit an annual report regarding all cropland use on their farms. These programs include the direct and counter-cyclical payment program and the Average Crop Revenue Election (ACRE) program. Reporting also applies to those who receive marketing assistance loans or loan deficiency payments. Failure to file an accurate and timely acreage report for all crops and land uses can result in loss of program benefits." It is not unusual for large differences between NASS and FSA acreage data to exist early in the FSA reporting cycle that begins in August since producer reporting is incomplete, but it is unusual for the large differences to persist in November.NASS lowered the estimate of planted acreage of corn by 756,000 acres in the October Crop Production report and left the estimate unchanged in the November report. Planted acreage is currently estimated at 90.885 million acres. In the November 13 report, FSA indicated that producers have reported planted acreage of corn of only 85.842 million acres, 5.043 million acres less than the NASS estimate. FSA will release another report of planted acreage on December 15 and a final report of planted acreage in January 2015 based on completed reporting by producers. NASS will release a final estimate of planted acreage in the annual Crop Production report on January 12, 2015. That estimate will reflect data from the large December Agricultural Survey as well as other administrative data, primarily FSA planted acreage estimates. Since NASS uses FSA planted acreage reports as input to its final acreage estimates, the differences between final estimates from the two agencies have historically been relatively constant and much smaller than the current difference of 5.043 million acres.Planted acreage of corn reported to FSA is less than the NASS acreage estimates since not all producers participate in farm programs that require acreage reporting. From 2007 through 2013, the final difference between the two acreage reports ranged from 2.381 million to 3.221 million acres and averaged 2.798 million acres. Stated differently, acreage reported to FSA ranged from 96.66 percent to 97.45 percent of the NASS estimate and averaged 96.93 percent.For soybeans, NASS lowered the estimate of planted acres by 655,000 acres in the October Crop Production report and left the estimate unchanged in the November report. Planted acreage is currently estimated at 84.184 million acres. In the November 13 report, FSA indicated that producers have reported planted acreage of soybeans of only 81.392 million acres, 2.792 million acres less than the NASS estimate. Like corn, the differences between final estimates from the two agencies have historically been relatively constant and much smaller than the current difference of 2.792 million acres. From 2007 through 2013, the final difference between the two acreage reports ranged from 917,000 to 1.866 million acres and averaged 1.292 million acres. Acreage reported to FSA ranged from 97.09 percent to 98.79 percent of the NASS estimate and averaged 98.24 percent.While the large differences between NASS and FSA acreage estimates are very large for this time in the season, the differences will narrow with the December/January reports from the two agencies. How that difference narrows, however, has important price implications for corn and soybeans. Last year, for example, most of the narrowing in the corn estimates was the result of lower NASS estimates. The FSA corn acreage estimates increased by 846,805 acres from September to November and by 76,120 acres from November to January. The NASS planted acreage estimate, however, declined by 2.038 million acres from September to November and increased by only 24,000 acres from November to January. For soybeans the narrowing was the result of almost equal changes in the estimates. The FSA estimate increased by 563,912 acres from September to November and by 76,120 acres from November to January. The NASS planted acreage estimate declined by 685,000 acres from September to November and then increased by 40,000 acres from November to January.While many suggested that increasing corn futures prices in October reflected the delayed harvest, the increase was likely more the result of the market's anticipation that the NASS estimate of harvested acreage would ultimately decline. After all, a delayed harvest doesn't alter the crop size and should have impacted the basis not the price level. The expectation of less acreage was confirmed in the October Crop Production report. The November FSA report suggests that further declines are likely. A small change in either direction seems most likely for soybeans.Editor's Note: Darrel Good is an ag economist with University of Illinois Extension.