“Fierce” acreage war ahead for growers
Solid risk management “has never been more important” for producers of the nation’s major commodities, given a range of volatility factors, North Carolina State University Extension specialist Nicholas Piggott told producers at the American Farm Bureau Federation’s 93rd Annual Meeting.
During AFBF’s session on the outlook for corn, soybeans, wheat and cotton, the Australian-born ag economist said that he anticipates “another fierce acreage-bidding war” this season. “This is fantastic for you farmers out there,” Piggott argued, citing producer reaction to strong market signals.
However, “acreage is not limited,” and tight corn stocks and continued high prices should translate to a significant boost in nationwide corn acreage, likely at the expense of cotton, and possibly soybean, production. Piggott noted 2011 was a “great year” for corn, cotton, and wheat but only a “moderate year” for soybeans, and this season’s U.S. bean market outcome may depend largely on South American weather and its impact on foreign supply.
“Unless the corn price comes down, which I doubt it will with the tight corn stocks, we’re going to need soybean prices to rally significantly to beat those (soybean-to-corn) acres back,” Piggott advised. “I think the balance sheets will look stronger for corn.”
Continued ethanol profitability also weighs in favor of increased corn plantings, he said, especially if the biofuels industry can overcome current regulatory and logistical obstacles and opposition from the small equipment sector to new 15 percent ethanol/gasoline blends. Hearty retail “E15” adoption could mean a 50 percent boost in ethanol market growth, Piggott projected.
Given a significant increase in cotton ending stocks for 2011 and concurrently healthy crops out of Australia, Pakistan and India, corn or wheat likely will grab more southern cotton acres in 2012.
Piggott sees growers weathering 2012 in good stead if they can manage anticipated high price volatility, particularly if they can sell crops in the top third of the market. That suggests reliance on crop insurance to provide a “base,” informed use of options, and aggressive forward contracting of “small parcels”—ideally, crop increments of no more than 5 percent.
“Volatility can be their friend, as long as they’re not greedy,” Piggott maintained. He chided growers to “spend far more time on your marketing.”