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October 2013 Archive for From the Editor

RSS By: Brian Grete, Pro Farmer

Pro Farmer Editor Brian Grete takes time to talk with Pro Farmer Members about some of the key issues in each week's Pro Farmer newsletter.

First look at 2014-15 corn, beans and wheat

Oct 18, 2013

Hello Pro Farmer Members!

As promised, we include our first look at the 2014-15 marketing year supply & demand balance sheets for corn, soybeans and wheat in this week's newsletter.

Do not write any of the estimates "in stone." All we're doing with this early look at the next growing season is trying to show the trends we're picking up from across the country.

Corn acres: Down from this year's plantings. Lower-than-year-ago revenue opportunities on 2014-crop corn will have growers looking to cut production costs, and going with lower-cost soybeans seems to be a popular trend at this time. We've also heard talk that some cotton growers will be looking to get back into the fiber business in 2014. If southern farmers liquidated all of their cotton equipment, they won't likely come back to cotton. But, if they've got a cotton picker (or access to one), they'll likely look at the opportunity to grow some 80-cent cotton instead of $4.50 corn in 2014.

Informa Economics, Inc., reportedly is looking for a 4.3-million-acre drop in corn plantings next year. That's got to be at the downside edge of corn acreage expectations for 2014. A drop to 91.7 million corn acres seems a bit extreme, but corn growers have become much more willing (and capable) to respond to market forces, so depending on what happens with 2014-crop corn prices between now and February (maybe March) will determine just how "low" corn acres fall.

Bean acres: Of course, if corn acres are down, bean acres are expected to be up. There is a growing desire to get closer to a 50-50 corn-bean crop mix for many Midwest growers. We don't see many southern growers backing off of bean production with the ability to capture some huge late-year premiums ahead of the Midwest harvest the past couple of years, which will hold up bean acres in 2014, as well.

Informa reportedly is looking for a 7-million-acre increase in bean plantings next year. Again, that's got to be at the upside edge of bean acreage expectations for 2014. An increase to 83.9 million bean acres seems a bit extreme.

Wheat acres: We expect an increase in wheat seedings next year with the underlying fundamentals of the wheat market turning more bullish. With problems in the Black Sea supply and with the flow of wheat from Argentina, there may be some incentive in the spring wheat market this spring to push acres even higher than we're expecting right now. Improved soil moisture conditions in areas of the hard red winter wheat region should also attract a few more plantings. We also see more soft red plantings stealing acres from corn this year, increasing the bean acre count as eastern Belt growers double crop beans.

Informa reportedly is looking for a 1.6-million-acre increase in all wheat seedings. That would put total wheat acres at 57.7 million, which is in line with our expectations at this time.

Cotton acres: As mentioned, we se some acres moving back to cotton in 2014.

Informa reportedly is looking for plantings of 11.2 million acres next year.

Carryovers: We see 2014-15 corn carryover up from this year, bean carryover up from this year and wheat carryover down a touch from this year.


That's it for now...

Follow me on Twitter at @ChipFlory

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How I see ethanol's future

Oct 11, 2013

Hello Pro Farmer Members!

I'll admit... I was less than happy about all the hubbub about the RFS today. If you've read this week's News page 4 of Pro Farmer, my attitude about the whole thing is clear.

What probably upset me the most is we don't even know if this is the proposal that was sent to OMB for consideration and analysis. Seriously... these proposals were on a "document" - at least I assume it's a document of some kind - that was dated August 26, a full week before the proposal was sent to OMB.

Now... a week's worth of time in Washington D.C. can either result in absolutely nothing, or it could result in sweeping changes that no body suspects. I imagine a week's worth of time at EPA isn't any different... so the actual proposal sent to OMB might - or might not - look a lot different than what was talked about this week.

It also got me thinking about something I've wondered about for a long time: How much ethanol would the country be using if we'd never had "mandated" use? You know, if the industry would have built up enough to cover the approximately 7-7.5 billion gallons worth of ethanol to cover the replacement of MTBE and then just let the market experience market-driven growth instead of mandated growth?

There's something a lot of ethanol-haters have probably forgotten (or never knew... or refuse to accept)... reformulated gasoline needs an oxygenate. And after they decided MTBE cause cancer, even the petroleum industry recognized ethanol as the most affordable source of octane to oxygenize gasoline. Which leads to what I believe is the future of ethanol...

Ethanol's octane value is grossly underrated by most in the industry. I realize there are other sources of octane, but ethanol appears it will be the most economical for quite some time. The auto industry can't hit federal mile-per-gallon goals with engine technology alone. They also can't do it on fuel technology alone. But - combine high-octane fuel with a higher-compression engine that runs cooler and turns out the same horsepower and the combination of fuel technology and engine technology will get us there. Because ethanol is the most economical source of octane, ethanol has a future as an octane for new fuel mixtures to power new engine technology.

And because I see that as the future of ethanol, I've gotten close (close) to saying we should just do away with the mandates. They're a PR problem. But you can't do away with the mandates... not yet. That's because the petroleum industry is still against the ethanol industry. That's true despite the fact that Velaro is a big-time refiner and ethanol producer and despite the fact that refiners are using ethanol to lower their refining costs and jack up the octane in what is now "E10-87 octane" gasoline instead of what used to be "E10-89" gas.

The production and sales of E10-87 gas is almost an admission by refiners that ethanol is here to stay... but not quite. At least they're using ethanol now to increase their profits instead of blending to satisfy a mandate. Without the mandate, however, it's probably too soon to assume refiners would continue to offer ethanol blended gas... until, of course, the auto industry starts putting out those higher-compression, cooler-running, high-horsepower engines.

Hubbub caused me to change my plans

The RFS hubbub also meant changing what we had on News page 4 of this week's newsletter. In the absence of USDA's Supply & Demand and Crop Production Report, we were planning to run the S&D tables, incorporating changes from the Quarterly Grain Stocks and Annual Small Grains Summary. We'll run those next week with commentary.

I'll also be talking about the S&D tables during a webinar Tuesday. Click here for info on the webinar.


That's it for now...

Follow me on Twitter at @ChipFlory

To join Pro Farmer, click here!

Does anybody miss the USDA data?

Oct 04, 2013

Hello Pro Farmer Members!

I had a chance to get up and fly over eastern Iowa again this week. It's really shocking how the drainage issues from this spring are still clearly evident in corn and soybean fields.

And there are some concerning issues out there with the corn crop, specifically how well (or poorly) some of the earliest-emerging corn is standing. Most likely, corn that was first up was planted in lighter soils that drained first. Now some of that corn - which probably went from dough to dead in early September - is still trying to stand while the rest of the field dries down. I don't know how practical it is to harvest spots of fields that are ready to go, but it might beat battling tangled-up corn when you do get back in the field after this weekend's rains.

There's the threat for some pretty rough weather around the Midwest this afternoon and into tonight. It's going to rain - that's clear. But it would sure be nice if the rain would come without any wind, but that's starting to look less likely, too. The first-to-emerge (and mature) corn that's having trouble standing now might really have trouble standing after this rain event.

Does anybody miss the USDA data?

I do! And I suspect more and more will miss USDA data early next week when we don't get a Crop Progress Report... and even more will miss USDA data by Thursday of next week if we don't get a Weekly Export Sales Report. By Friday, most everybody will be missing USDA data if the Crop Production and Supply & Demand Reports aren't released.

I'm really going to miss the Crop Production Report. The October update should be when USDA's NASS taps into the FSA certified acreage data and makes some adjustments to the planted and harvested acreage estimates. Those adjustments are crucial to getting a better picture of actual corn and soybean crop potential. Many of the crop estimates that are circulating the markets now (with more to come next week) are using USDA's acreage estimates. If corn harvested acres are cut about 1.5 million and bean harvested acres are cut about 400,000 acres, that makes a significant difference in the crop estimates. Those are our current expectations - and are why our corn crop estimate is at 13.5 billion bu. with the bean crop estimate at 3.097 billion bushels.

Also, the lack of a fresh flow of information to the grain and livestock markets could start to drain activity and trading volume out of the markets. That's not normal at this time of the year. And as volume drains from trade, the markets then become vulnerable to wild, unexplainable price moves. Hopefully, that won't start to happen. But, the longer the markets go without a fresh flow of information, the more likely a drop in trading volume will be.

Perhaps most vulnerable are the livestock markets. Without daily slaughter, price and demand info, traders are left "guessing" what's happening in the cash markets. Well... that's an overstatement. Most aren't "guessing." There is private-industry information that seems to be providing sufficient info to the futures markets for now. Which is awesome! (Wouldn't it be something if the markets discovered we really don't need the USDA info?)


That's it for now...

Follow me on Twitter at @ChipFlory

To join Pro Farmer, click here!

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