What makes me optimistic about 2014
Dec 20, 2013
Hello Pro Farmer Members!
Merry Christmas! I'm looking forward to the days ahead as we celebrate the birth of our Savior Jesus Christ! I've got kids home already and we'll be traveling to see family over the days ahead and it's just really tough to imagine a better time of the year than we've got in the days ahead.
We had a great time at the Mankato, Minnesota, Profit Briefing Seminar and we're looking forward to the Western Corn Belt Profit Briefing in Lincoln, Nebraska, in January and the Eastern Corn Belt Profit Briefing in Peoria, Illinois, in February. Those are the two remaining Profit Briefing Seminars we have planned for this winter, so make plans now to attend. (Click here for the details.) This year's Profit Briefings are in a two, half-day format (afternoon-morning), leaving plenty of time for you to network with other farmers from the area and to swap ideas with your Pro Farmer editorial staff. We look forward to seeing you in either Lincoln or Peoria in early 2014!
The "attitude" among attendees at the Profit Briefing in Mankato was wide-ranging. The past two years were filled with optimism, even after 2012's dreadful drought. This year, even the most optimistic are just cautiously optimistic. And that's probably a good thing. What it means is even farmers that are relatively debt-free are looking to pull-back on spending... at least a bit.
Those most pessimistic and anxious about the year ahead are those carrying the heaviest debt load. In the past two years, even a heavy debt load couldn't squash the optimism in farming. This year, debt-heavy farmers are seriously looking at cutting production costs. That means the speculation of a move in corn acres back to soybean production for 2014 is probably right. And even on the corn ground, some growers will be looking to cut costs by evaluating the potential returns of some "costly" inputs... things like starter fertilizer and P & K.
P & K has been banked in the soil the past two years and the only way a farmer can monetize the investment in "extra" P & K applications in previous years is to reduce applications (or skip a year all together). That seems to be a fairly widespread plan for 2014... even for those with a relatively light debt load. There's no way of knowing right now what kind of impact that might have on corn yields in 2014, but it does increase some of the uncertainty about 2014 yields.
And there are reasons to be optimistic for the year ahead. Demand for soybeans remains excellent and demand is steadily coming back to the corn markets. Wheat demand is still an unknown for 2014, but recent export demand signals importers are looking for quality supplies and that means coming to the U.S. for assured good quality wheat.
Pork demand will go through a major transition in 2014 as more and more of the pork produced in North Carolina heads to China. That will change the supply flow of pork to the East Coast and major markets along the Atlantic will be pulling more pork from the Midwest than in the past several years. This change in the dynamic of the market is one of the reasons we selected Smithfield Foods, Inc., CEO Larry Pope as our Ag Person of the year for 2013. We realize not everybody with be happy with that choice, but there is no denying he was the guy at the center of a major story in agriculture in 2013. The sale of Smithfield to a Chinese meat processor really drives home the fact that China is struggling to provide the food it needs to feed a growing population... and a rapidly expanding Middle Class in China.
Yes, China's hog herd is something like four-times the size of the U.S. herd, but it's scattered across the country and is in "herds" of a few hogs held by about 900 million people in rural China. Feeding rural China with pork isn't the issue... the issue is feeding a pork-hungry urban population and the purchase of Smithfield is clearly designed to increase the flow of pork to urban areas.
And just as importantly, with every pound of pork that's grown and processed in the Smithfield facilities and exported to China a little bit of U.S. grown corn and soybean meal will be going with it. China is farming out its needs for soybeans to the U.S. and South America... is farming out more of its corn needs to the U.S., Argentina, Ukraine and Brazil... and is farming out more of its pork demand to the U.S. Feeding China (and an increasingly wealthy Chinese population) will continue to be one of the major challenges (and opportunities) for U.S. agriculture in the year ahead. I won't base all of my ag-optimism on Chinese demand alone, but China's buying of U.S. ag products is at the base of a lot of my optimism for the year ahead.
We'll talk more about this issue early in the new year...
That's it for now...
... Merry Christmas and have a very happy New Year!!
Follow me on Twitter at @ChipFlory
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