For a short time last week, the main question in agriculture was whether farmers would really plant 96,990,000 acres of corn this spring.
The reason for the curiosity was the U.S. Department of Agriculture's survey of 2020 prospective plantings, which forecast 97 million acres of corn. It would have been the second largest corn acreage, compared to the 97.2 million record in 1937.
Back then corn was needed to feed hogs, known in the Depression as “mortgage lifters,” and for home furnace heating. There was a great demand, but today, that demand is waning. By odd circumstance, the USDA’s annual survey in early March came at a time when soybean prices were in an 80-cent freefall, but corn prices were more stable, with only a 20-cent freefall.
When the USDA prospective acreage was announced, the ratio of soybean to corn prices was 2.45, which means corn may have a slight profitability advantage of a dollar or two per acre. But nothing for farmers to write home about, or even call their seed supplier to switch their order from beans to corn.
Since March 31, when the USDA report was released, the ratio of November soybeans to December corn futures has moved upwards, to 2.46. That might add a few pennies to corn revenue per acre, but nothing more.
So, farmers are mired in the lack of profitability for either corn or soybeans in the crop that will soon go in the ground as planting season shifts into a higher gear. Some farmers will switch to soybeans, hoping China will buy U.S. soybeans as South America runs out of supplies this summer. Other farmers will try to hedge their neighbor’s penchant for more soybean acres and will plant more corn.
There will be a lot of trade-offs, and the market thinks corn acreage will decline a million or more acres and soybean acreage will increase a million or more. Regardless, once the seed is in the ground, the commitment is made, risk must be managed, and farmers must do their best in implementing a marketing plan.
But while the crops mature, many dynamic political and economic forces will ignore the acreage details and make the March 31 USDA numbers mostly meaningless. Among those forces are the troubling decline in ethanol demand, due to OPEC and COVID dynamics, as well as Chinese commodity buyers who have gotten a slow start, but seem to be catching up to meet their promises in the Phase 1 trade agreement.
Farmers cannot impact such global forces, but can have an impact over more local opportunities that have profitability opportunities. Those farmers may be able to add revenue 10% here and 10% there with creative plans.
Those who are not up to such challenges will find themselves trying to cut production costs 10% here and 10% there until they find they are farming for nothing.
Stu Ellis is an observer of the Central Illinois agriculture scene. In addition to his weekly column, you can view his “From The Farm” and “Harvest Heritage” reports on WCIA 3 News.
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