If farmers were banking on finding “normal” in 2022, the year is off to a rocky start. From issues sourcing inputs to input prices holding at record and near-record levels, acreage decisions in 2022 are being shaped by more than just weather and commodity prices. Input availability issues are also adding a wildcard into the acreage game.
“There are plans being put in place, but this year, more than ever that I’ve seen in my career, there’s also the knowledge that we may need to pivot from these plans once, maybe twice before we actually get to planting season,” says Alan Hoskins of American Farm Mortgage.
Early estimates for 2022 acreage are being thrown around, with most pointing to more corn acres this year. But a farmer-based survey recently revealed U.S. farmers may be opting for more soybeans versus corn. However, those plans could change.
“I’ve never seen this type of circumstance in my career. And in talking to farmers, they’re voicing the exact same thing. And they are working toward trying to normalize the year as much as they possibly can, but also understanding that they’re dealing with more risk than they’ve ever seen,” adds Hoskins. “And thus far, they are doing a really good job of engaging in conversation with the people that can help them and trying to have a multifaceted plan.”
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Booking inputs ahead of planting is nothing unusual. But this year, Andrew Jackson of Producers’ Hedge says booking inputs that are at record levels, without selling some of your crop at current prices, could be a risky decision this year.
“In a normal year, most farmers wouldn’t think twice about going out and booking 100% of their inputs and selling their crop steadily throughout the year or waiting until they know they’ve got a crop in the ground and a crop to harvest and then selling,” says Jackson. “But I’m not sure that this is the year to really fly by the seat of your pants and book 100% of your inputs, which includes booking $1,500 anhydrous, and yet just waiting to sell corn.”
Jackson says with the roller-coaster ride commodity prices have been on the past two years, there’s no guarantee prices will propel higher or sink lower. But there is a guarantee of risk either way.
“Maybe we’re back at $7 December corn by next harvest, but maybe we’re not,” says Jackson. “You have to kind of prepare for the unknown here. There are things that we can do. And remember, nobody saw COVID coming. And remember the August 2020 report was a bearish report that we had a bullish upside reversal. Nobody saw that coming. So don’t think that it can’t happen this year. There’s always something that comes along that we never expect.”
That’s why Jackson suggests to remain flexible. He says his advice to farmers isn’t to sell 100% of their corn and 100% of soybeans in cash sales right now. Instead, he advises farmers to know their margin and manage the downside risk
“What I’m telling you is if you’re booking inputs, you are 100% long fertilizer at record high prices,” says Jackson. “The top in prices may be in now, or the top may be in later, but you’re taking an incredibly risky position. So, we need to look at some strategies, to at a minimum, get started with some cash sales. Get started with protecting floors. There are a lot of strategies we can use to do that.”
