Market Strategy: Can We Grow Enough?

February 4, 2011 05:02 PM

Stocks of feed and food in the U.S. and around the world are tightening to critical levels. The acreage battle and the question of whether we can grow enough to meet demand without severe price rationing is up for debate daily. The March 30 report will give the first survey-based estimate of the acreage mix.

Producers are being told to take their planting cue from the marketplace. Currently, we are experiencing the best of times—anything we grow will reap a profit.

For years, I have tried to stick with a corn after soybeans or wheat (in the Dakotas) rotation. The tangible benefits this year are even better when I consider nitrogen prices and yields.

Time is of essence when it comes to planting and harvesting. A corn–soybean rotation provides peace of mind knowing that once soybean harvest is done, I’m ready to strip-till nitrogen regardless of conditions (which was a big benefit in 2009’s wet fall) and then come spring no-till corn on bean stubble. I figure that psychological value is worth \$12 per acre. Because nitrogen prices exploded in the spring, the cost differential of fall versus spring-applied nitrogen was about \$30 per acre.

Corn after soybeans or wheat can yield 10 bu. to 30 bu. more or \$50 to \$100 more per acre at \$5 corn. If I include the (next year) nitrogen benefits of soybeans, I estimate a total return of \$2.75 per bushel—or \$137 per acre from a 50 bu. soybean yield.

The Acreage Battle. On a weekly basis, research firms, such as Informa, Linn Group and FC Stone, calculate the advantages of one crop compared with another. Few, if any, consider the benefits I just mentioned. Computer-generated mathematical models are useful, but man makes the decisions. Most models dismiss the non-mathematical benefits. This year’s final planted acres may be surprising.

Available Acreage. In the table at left, the 2011 numbers are not just my guess of what could happen, but what needs to happen. Price is a great fertilizer, and it will have to continue to be favorable through February (insurance revenue determination) to provide an incentive to plant inefficient acres, tear up pasture and hay and bring expired Conservation Reserve Program (CRP) and preventative planting land into production, even if it takes until June 15. Corn needs 92 million to 93 million acres and soybeans can’t afford to give up any acres.

Price rationing in 1996 in a similar food and feed stocks situation got the job done, but it took a 125% increase of the former high of \$4. End users are more astute and livestock prices are at or approaching record levels, giving one pause as to when or what it will take to curb demand. Not knowing how high is high enough to get the job done in 2011 will keep the markets jumpy into each quarterly stocks report. The high in July of 2008 was \$7.50. A similar 25% increase in a blow-off top market is not in anyone’s vocabulary.

Back to news

No comments have been posted to this News Article

Machinery Pete Dissects the Newest Tractor Trends

By Ben Potter
•  A Mouth Full of Crickets? Lobbyists Speak Up for Edible Insects 07/26/2016 05:16 AM
•  Russian Wheat Falls on Competition With Ukraine, Romanian Crops 07/26/2016 03:13 AM
•  Ethanol Survivors Bid on Failed Rival as Demand Expands 07/25/2016 10:07 PM
•  Top Pork Eater Gobbles More Imported Feed for Expanding Pig Herd 07/25/2016 09:30 PM
•  'Tips Notebook' Tackles Common Tractor Questions 07/25/2016 03:24 PM
•  Idaho Officials Propose Aquifer Management Plan 07/25/2016 02:54 PM
•  Ohio Crops Holding Their Own Without Much Precipitation 07/25/2016 02:02 PM
•  Balance GT Soybeans Receive EU Approval 07/25/2016 01:28 PM

Corn College TV Education Series

Get nearly 8 hours of educational video with Farm Journal's top agronomists. Produced in the field and neatly organized by topic, from spring prep to post-harvest. Order now!

Markets

Market Data provided by Barchart.com
 Cash Bids
 LDP Quotes
 ©2016 Farm Journal, Inc. All Rights One Penn Square West 30 S. 15th Street, Suite 900 Philadelphia, PA 19102
Close