Print Pledge

The above review is a fundamental look at the potential changes in the Corn market and how a lower stocks level should relate to higher Corn Prices. Many factors can and will be an influence to what actually happens. MDI is doing this review to encourage producers to look ahead as we have seen the struggles that farmers go through when stocks are burdensome and we believe in the philosophy of WORK WITH WHAT YOU CAN CONTROL. Ag producers do have the final say in what they plant.

MDI is not looking for producers to shift the proposed reduction of acres just to another crop but recommends that they be idled as is shown above – see the cost of fallowing or planting a cover crop on these acres.

Some benefits of idling these acres may be to get a weed problem under control due to the ability to till or use a different chemical to control weeds that may not be possible if a traditional crop is planted.

A crop that adds nitrogen or other nutrients to the soil may reduce costs on these acres and/or increase yield potential next year.

A crop that goes down and breaks up a hard pan area can be useful in increasing future yields and may increase soil moisture holding capacity.

Some areas are too dry to expect a decent chance of growing a good crop and setting these acres aside could net more money than risking expenses to put in a crop – especially if the crop insurance coverage price remains at current price levels.

If you set aside 8.4% of your acres the price needs to advance around $.40-$.45 to see your gross income come out the same as planting all the acres at the $4.50 DEC 14 Corn futures priced used in this review. This is around a 10-11% advance in price.

The 93.3 million acres of Corn shown for 2014 is already down 5.7 million acres from what USDA showed was planned in 2013. This is the 95.4 million planted plus 3.6 million of prevented planting acres.

MDI and others are looking for a rise in 2014 Soybean acres to the 82 million acre level which is up around 5.5 million acres or most of the acres mentioned above.

Using 82 million acres times a 99% harvested level times a yield of 44 bushel equals potential 2014 production of 3.572 billion bushel. Add in 28 million of imports and ending 2013/2014 stocks at the current USDA level of 150 million creates a supply of 3.750 billion bushel. Taking off the current 13/14 demand of 3.309 billion bushel would leave a carryout of 451 million bushel or a price negative 50 days or nearly double the ending days of supply level we have seen since 2000. Adding even more acres to soybeans may compound this situation. Added demand could arise but probably only with much lower prices – if – the large South American crop becomes reality and raises the world carryout to the current USDA projected 99 days ending supply vs. an 81 average since 2000.

Some of the diverted acres from corn may get planted to wheat which currently sits at a slightly below average U.S. ending 13/14 days of supply of 82.9 vs. a 102 average since 2000. World stocks of wheat are at an average days of supply level of 95.3 days.

Some of the diverted acres may go to other crops such as sunflowers, feed crops, oats, barley and others that have seen the total acres planted go down in favor of corn the past several years. Dry weather in parts of the Midwest might mean some irrigated acres could be used for a grazing project as pastures in many central and southern areas are already stressed from the drought – click here - for the current Drought Monitor map.

Corn demand may increase in 2014 but it may take lower prices or an increase in carryout to over 2.000 billion bushel may occur. Planting 93.3 million acres at 92% harvested at a 163.1 yield produces a crop of 14.000 billion bushel. Add in 14 million of imports and 1.481 billion of ending 2013/2014 carryout and the supply is 15.495 billion bushel. In order to arrive at a 1.145 billion ending 2014/2015 carryout level, demand would have to grow from the current 13.300 billion shown by USDA to 14.350 billion bushel. This is not likely based on current market factors.

Some say that any reduction in the U.S. acres will just be offset by added foreign production. It is true that a $5.40 DEC 14 futures price may encourage some increase in foreign production but possibly not any more than the added world demand we may see. This price is a considerably different encouragement than the $6.50 to $7.50 prices of a year or so ago.

If a producer sets aside their acres and others do not, the price advance desired may not occur. The offset to this is that you are only looking at 8.4% of your acres and you should consider the lost Net Profit per acre planting the crop at current prices and costs – not just the reduction in gross income. Also will you have a chance to regain the lost profit in 2014 with a higher yield potential in 2015 based on setting aside acres needing some sort of management for a hard pan, dry weather, added nitrogen from a cover crop, and/or better weed control through rotation. Also if all acres are planted, what will prices look like? Will the futures hold the $4.50 DEC 14 level if the carryout grows even larger? Many are talking about prices falling to the $3.50 to $3.00 or lower level by the end of 2014 – based on an increase in ending corn stocks.

Producers are encouraged to review the new Farm Bill and how it affects their situation before making a final decision on whether or not to take the Pledge to Reduce their planted acres.

Many factors and situations may arise and each producer must make their own decision on what to do with their acres. MDI is simply pointing out these scenarios and encourages each of you to look at your own situation carefully before planting. No one knows what the future will bring – make your own decisions based on the best information you can find that fits your situation.

If you are interested in TAKING THE PLEDGE for HIGHER CORN PRICES – click here and enter the information in the next page of this review.