2019 Acreage: Stay Engaged, Watch Small Rallies and Mind Profitability

12:03PM Mar 04, 2019
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Undoubtedly, 2019 will be another year with agronomic and financial challenges. Before seed hits the soil take the time to think critically thought your acreage mix and marketing plan to take advantage of any opportunities.

“We tell our producers to keep tabs on our costs of production, break evens and profitability,” says Matt Bennett, owner of Bennett Consulting and partner with AgMarket.net, farm division of John Stewart and Associates. “I want to look at my profitability around now.”

The market and USDA are signaling a shift—to the tune of 3 million acres—into corn. How should you adjust your marketing plan to take advantage of whatever prices come your way? And what does this mean for your acreage mix?

“Last year we got the rally in the spring timeframe and [it] probably caught a lot of folks off guard because they expected a rally for the summer weather market,” Bennett says. While it can be tempting to be bearish for the summer market, it’s not always the best idea to put all of your eggs in one basket.

“[This spring] if we get to $4.18 corn, which is a little bit above the high two years ago, we would be moving to like 40% [sold or committed],” Bennett adds. “In corn we have the tightest stocks-to-use ratio we’ve had since coming out of the 2012 drought. Could the corn market rally significantly? With the right recipe it could, but I don’t want to ignore any sort of even small-scale rally and I really want to scale into that.”

When it comes to soybeans, trade uncertainty and high stocks is sending the market on a rollercoaster ride—something that should be on your mind if planting the crop.

“If we keep our corn-soybean rotation we’ve got the most stock and high stocks-to-use ratio in the U.S. and in the world in soybeans,” Bennett says. “U.S., China trade deals—are they going to skyrocket the market or is it going to keep the market at levels that are maybe too high in the first place. Keep that in the back of your mind.”

Consider nutrient costs, yield potential and marketing opportunities when finalizing acreage mix. Much fall field work didn’t get completed because of harvest delays and spring fertilizer prices aren’t looking friendly for farmers.

“I’ve got UAN 28% and 32% both up,” says Davis Michaelsen, editor of Pro Farmer’s Inputs Monitor. “28% is up 21% over a year ago and 32% is up 24.3% over a year ago. So, there isn’t going to be much of a price break for side dressing either.”

Corn farmers will be in a pinch to get nutrients applied this spring.

“USDA is projecting a shift from soybeans to corn and we didn’t get a lot of fall tillage or anhydrous ammonia done,” says Gary Schnitkey, with Farmdoc at University of Illinois. “Illinois, Iowa and Minnesota didn’t get it down at the same rates we’ve seen them. Farmers who contracted anhydrous ammonia and got it down in the fall were at $500 to $525 [per ton] and it looks like that anhydrous ammonia will be over $600 for the spring—which makes corn less profitable.”

With a sizable increase in per-ton nitrogen cost, Schnitkey is adding $10 to $20 per acre to budgets for the cost of corn. An important consideration to keep in mind when it comes to crop rotation and possibly not trying corn-on-corn to take advantage of the market. However, high yields could help make up some of the added costs.

“Since the drought year in 2012, calculated trend yields in Illinois have been above trend line yields be 20 bu. per acre on average,” Schnitkey says. “Soybean yields are six bu. per acre higher and that has a big impact on budgets and returns you should anticipate.

Have two budgets—one for an above-trend year and one for an on-trend year and know what you’ll do financially in either situation. This helps plan for the what-ifs weather and other unknowns can present your planting and marketing programs.

Experts caution farmers from breaking crop rotations. While it might be tempting to try corn-on-corn for the first time because the market is favoring the golden grain that short term gain could provide long term pain.

“Stick to your rotation—don’t chase after profits by shifting acres,” Schnitkey says. “When we look at studies around more profitable farmers they typically don’t recommending shifting acres, they stick with the rotation because of the advantages it provides production-wise.”

In fact, Bennett is glad the February report dump didn’t cause a stir in the market to increase corn acres—potentially hurting market potential.

“The February report for me wasn’t such a bad thing because we didn’t skyrocket the corn market, buying more acres,” he says. “Someone who wants to see a rally in 2019 [means] it might not have been the worst thing to see.”

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