Field Crop Webinar Series - Crop Marketing Outlook & Strategies

April 1, 2019

MSU Extension Agricultural Economist Dr. Jim Hilker describes the current status of commodity markets and gives projections for the short term.  While most producers have a pretty good idea what crops they will be planting this spring, largely due to crop rotations and input purchases to date, most have the ability to make marginal changes on how many acres of each crop they will plant depending on their best guess of what relative prices will be. For example, for most producers, soybean prices versus corn process suggest returns per acre will be higher for corn this year than soybeans. The question is will those relative prices change between now and actual planting this spring. The answer could change given the markets expectation for total corn acres planted versus soybean acres.

Video Transcript

- [Jim] Hopefully, let's see how close I can get, I been trying to get it right for the last 37 years. Once in a while, I'm successful. I'm going to go through it crop by crop, I'm gonna start a little bit on corn wheat and soy beans, where we are right now. Then I'm going to build in the, what I expect to happen given the perspective planning reports that just came out and the stocks reports that just came out. There was information that was different than expected and the markets have been reacting to 'em. Of course, there's a lot more that are comin', we'll talk about different possibilities as we go through. Just lookin' over the last 20 years, we were in a period, back through '95 all the way through '78, where the average cash crop price, a little bit lower than this, was about 235. We went through what I call the ethanol period. There was other things going on but that was the major player. We still are producing about as much ethanol but the market's grown to handle it and we need to sort of figure out, are we at the new normal? Will the new normal be a little higher? And at the end, I'll actually give you some ideas of what I think will happen over the last five years. If we look at this market, it's been disappointing since basically almost a year ago. If we look back towards May, we hit a high, that's when we had some light plannings, it looked kinda dry. So this had mostly to do with it, 2018 crop. If you see over here, and we'll get to what it is, you see the price drop dramatically, after releasing the report, as we had more corn acres, and we'll talk about specifically what they were. We covered somewhat today, and we'll need to keep a close eye as we go over the next time. It's a nice day here, but right now, at least in the Mid-Michigan area, it's kinda hard to see when we're going to get into the fields, as wet as it is. So we definitely won't have an early spring, you have to know how late a planning we'll have. We ended up planning 89.1 million acres of corn last year. We harvested about 81.2, both just a little bit less than the year before, and we had a yield that wasn't quite a record but it was just barely smaller than the previous year. It's important to point out, one of the reasons we're in this is one, two, three, four, five, the last five years have also been the five highest yields ever, even given the little bit poor yield in one of those years. And if we look at the corn yields, Michigan came in at 153 bushels an acre, about six less than they though in November, as we got more into the field, where we had some off record yields. Illinois harvested 210 bushels a acre, average for the state. Iowa only had 196. When you have 192 in Nebraska, 153 in North Dakota, 182 in Minnesota, those are really high ones. If you look at the blue one here, those were all records just this past year. We had a wet spring and a wet fall, with a dry summer and didn't have a terrible yield but we probably were five or six bushels below trend. I said we had the five highest yields but we go one, two, three, four, five, six, the past six years we had the six biggest production years ever. One of those years, we had a low yield, but we had the highest planted acres on record. So we've just been producing a lot of corn for five straight years, and it looks like the acreage for next year will be high as well. So those numbers are here. We brought in about two billion bushels to start the year, a little less than last year, but as you see, a lot more than any other year, except last year. We produced 14 to 14.4 billion bushels. So the total supply was down 300 million acres but still the third largest on record after the previous two years. Food use, and this is my estimation, the USDA will update theirs. The reason I lowered feed use isn't particularly because I, well, I'll talk about it here. If we look at meats, we expect to produce more meat this year than last year. At first glance, that would indicate that we ought to use more corn this year than last year, but a couple things seem to be going on. One, there seems to be a little bit less waste. Two, there seems to be better feeding efficiency, but the other thing that might be good, and here's why I lowered it. It's a little hard to see but this is the map we used in the second quarter last year, and this number is smaller, almost four or 5% smaller. The other thing that could be going on is that the crop, this past year, might've even been a little bit bigger than the records are. But whether we should add the crop figure or whether we're using less feed, the bottom line is is we have more corn on hand now, about 250 million bushels than the trade expected. So I have adjusted the balance sheet by lowering the feed use. The results are the same, if I'd lowered the feed use or I'd increase the amount of corn. So that really was one of the things that showed that the corn market wasn't just that, as we'll get to, we planted more it, we planned on even more corn acres than we thought, but we had more corn on hand halfway through the year. The next thing I wanna look a little bit is ethanol use. Ethanol use year to date has been a little bit below last year, and one of the reasons it was lower is if we look at profitability. These red marks is when the ethanol operating margins are above variable cost. If those red is above the black line, it would be, there is economic profits, i.e., even taking full opportunity costs on all the capital. As you see, for a couple months here, it was about negative. While there's been a little bit of rebound with the higher oil prices, we expect the ethanol use to kinda level off and maybe even dip a little bit. Excuse me, ethanol production, which then translates into use, as we go through the years. So that's a little bit disappointing. The next thing we look at, as we go, is exports. We expect exports to go down, so let's look what's going on in the world. If we look at the world as a whole, this is 1.1 trillion bushels of corn. We had a little bit less but the rest of the world had a little more. This is the most corn the world's ever produced. So while we're down just a little bit, the rest of the world was up, Argentina and Brazil being the biggest parts of that, and the Ukraine was the other big player in year to year. Now we have to be a little careful because while this Argentina crop is pretty well known by now, not quite, the Brazilian second crop isn't. Brazil has two seasons, they grow about 60% of their corn in the first season, and a little over 40% in the second season. That's even being planted now. At this point, they had some drought, which hurt your previous crop. There's no reason to believe they won't have a typical second crop but we're gonna have to watch that closely. So right now, we have a big crop built in the prices. Exports inspection to date have been running above a year, so why am I predicting exports might go down? As you see last year, exports started off slow and then sped up. This year, exports started off fast and have been leveling off a little bit. This is what we've actually exported. If we look at what exports plus, the number's much closer together, and in fact, it's not closer together. If you add what we've exported today, which is ahead of last year, and add to that what we've contracted the export, we're actually below last year's number. Last year, we were at 1.8 billion bushels at this time, this year we're just under 1.7 bushels. So the exports to date is a little bit misleading compared to export sales to date, which include the part we have sold but haven't shipped to the countries. The value of the dollar has had a slight increase in the last three months. The sum of this here was due to the little bit higher interest rates, but the last time the interest rates were raised was in December, and then our economy looks a little bit poor. So the biggest player in the value of the dollar is how the economy's going in the US versus the rest of the world, and while it's not completely clear right now, most people would argue the dollar, the US is a little stronger economy than the rest of the world and that's given us some strength in the dollar. Why this is important, if the dollar gets stronger, that makes our exports a little bit more expensive. It takes more of a foreign currency to buy a dollar, to buy US goods. If we look over at the last 20-year period, the value of the dollar was kind of in the mean over that time of period but you see there's, I'm not sure what the mean is, means, excuse me, because it's been such a variation. Over the period of high crop prices, most of that was due to supply and demand but the value of the dollar was historically low at the same period. As we started getting extra corn supply, unfortunately, at the same time, we got a stronger dollar, so this is having some effect on our exports, but it's about the same effect it's had for the last couple of years. If we look for the world corn supply and use, we brought in a little less, the world brought in a little less corn, produced a little more, as we thought about, feed use is stronger, total use is stronger, and it's fairly positive that ending stocks on the world front, at the end of the 18/19 crop year, so that's other than in Brazil, pretty much we've harvested most of that crop. That's a good sign. It's 32 million metric tons, times 40, so it's a lot of corn. So the world is, picture this year is good. The problem is we expect use to be a little bit less than last year's use, on feed use and ethanol, and a little bit on exports, but we still have a smaller ending stocks, but is still relatively big, 13.6% use, translates into about $3.55. If we look at that 13%, we're right in here. So basically, the market is at about the level that fundamentals would suggest. And that matches up some what with futures, futures are a little lower than that, but we've sold an awful lot of corn already this year, is why we're averaged at 255. We gotta be pretty careful. If we look at what we wanna do, what corn we have in storage right now, the market has said it would pay for on-farm storage, so I'm sure a good number of producers have corn storage. The stocks report says a good deal of corn is stored, although in Michigan, the elevators are storing more corn right now than producers, or more is in there. It's not clear how much that corn is owned by producers. The futures market is telling us it will not pay to pay commercial storage plus opportunity cost, but it will pay to store on farm. This market says about four and half cents, but if we look at the local basises, we have a stronger basis in May than we do in July, so it's really only paying, in a lot areas of state, four or five cents to store it two months, not this nine cents. Now, as they need more corn going in July, the local basis could tighten up. At this point in the market, if I had my corn stored off farm with the high payments, I'd probably move to a basis contract, if I was optimistic. If I was on farm, I'd probably be watching the market closely, watching to see whether I wanted to lock in my basis, as we have quite strong basis right now, and try and look at this futures chart to see if we'll get a little bit of this back. I'm not real big on pricing futures right now. I think we will make a little bit of a recovery, this big drop was due to the more corn being planted, but in just a second, we're gonna talk about that more. My guess is, unless the season starts being really strong and the crops come up really great, we're probably closer to the bottom than to the top of what we'll see the market over the next six months. That does not mean I'm really optimistic, I'm just a little bit more optimistic than where we are right now. To look at this the report and where it's going, this is all the crops planted. Last year, we planted just under 320 million bushels. This year, we planted four million bushels less than that. So in one sense, that's down four million bushels. Percentage wise, that's only about one and a half percent. So it's not big but the direction we see there, towards planting less, is real and that's directly a function of low prices across all commodities. As you can see it here, it's quite a drop from last year and it hasn't been this low since 2011. Michigan's expected to plant about, we plant, and this is hay and everything, and I'll show you what all the crops are in a minute, 6.4 million acres and we're down about 31,000. Illinois is about 83, 70, 110, but there's a few places like North Dakota that plan on planting more total crops, and as we look at the specific crops, we'll see what some of those are. But the red is decreases and you see far more decreases than you see. But it's interesting, Iowa is not a decrease. So here it is, the big decrease in corn is 3., increase in corn is almost 3.7 million acres. Corn is down about 4.6. So that by itself is about, just under a million acres. If we add wheat, winter wheat's down another million, so that's two million, and if you add the other type of wheats, that's basically just under three million acres, of the four million-acre decrease can be explained by fewer soybeans, wheat acres, even accounting for the increase in corn acres. Sugar beats hung in there. So corn, we expected to plant 92.8 million acres. As we talked about, that's 3.6 more than a year ago. Now why are we doing that with poor corn prices? Well, producers, as you know, if we're good in eye, we're looking for the highest return per acre and we look at expected corn prices, times expected yields, minus cost for corn, and for a majority of the farmers, that returns per acre for corn is higher than, well, the yield rate expected on soybeans, times the price we see offered in November for soybeans, minus soybean cost. So even though it's a little cheaper to plant soybeans, the net returns of corn, for many, many farmers, most farmers is significantly higher enough to soybeans that we'll switch it to corn to at least get the, not a good return per acre, but a higher return per acre. As you see, we've jumped up, we haven't jumped up to our record levels, but it will be one, two, three, four, it'll be about the fifth highest amount we've planted. Michigan, but let's talk about that just a little bit more. Right now, we, it's awful wet out there, it's hard to see how we'll get it all planted. There's about a million acres of cropland sorta underwater, with some of that being corn and soybean land, a good chunk of it. Some of that will dry out in time, some of it may turn out to be preventive planting, we're not sure. The second thing that may change this number somewhat is not so much the acreage, it is weather. The longer we get, the later planting times, farmers may decide that that relative returns to corn may change. If they're late enough, they think they'll get a poor corn yield, or it's too late to plant corn and they have no choice but to plant soybeans. I think this probably will end up being the most corn we may plant, but again, we'll watch that closely. Most of you out there can have a little bit of flexibility on five or 10% of your acres, what you end up planting, and we'll have to keep the window open for that. Right now, we looked at the smaller soybean acres already, but that doesn't completely get the job done. We didn't have an increase in soybean prices like I was expecting given that report, and we'll talk about that with soybeans. So Michigan itself is planting 50,000 more acres, which percentage-wise is a little less than some other parts of the country, but not a whole lot, I mean, Illinois is gonna plant four times as much but they plant about four times as many acres. Michigan is expected to be down. The trend corn yield is about 174 bushels in acre next year and what I did is I just basically took a trend line from 1989 through 1918, through 2018, to project the yields. So when I take the 92, I take the average number of acres we hold back for silage, along with the average preventive planting, and we come up with 85 million acres, 174. If that comes out, even with a lower yield, production will go up by about 400 million bushels, and even though we bring in a little less, it looks like we're gonna bring more in than we previously thought, and if that's the case, we'll have the third highest supply on record going into the year. If we look at feed and residual, the Hog and Pigs Report came out, it looks like hog production is at very high levels right now. The Hog and Pigs Report says we're going to probably stay at those levels, maybe not grow, but there's no sign of shrinking. When we look at the amount of sells, we expect fairer, and if you fair the same amount of sells, when pigs per liter go up one to 2%, that means we'll have more of hog production come into market. Demand should be able to take care of that price-wise for hog producers. It should mean we will be feeding at least as much or a little more corn as we go through 2019 and 2020. There was just as many beef cows that were bred to produce calves this spring, so again, we're not seeing real increases in cattle feeding, they'll be marginal but we'll see increases in cattle feeding way into 2019/2020, so feed demand ought to be pretty decent, and those numbers are pretty recent numbers. As we look at ethanol, I expect it to hang in there about the same levels. We have it most of the gasoline. Gasoline usage is going up a little bit, but many of you probably notice some of the oil prices. So we see higher gasoline prices at the pump. So while the economy's going well, we're driving a few more miles, I think the higher price will tamper that a little bit, plus we may have more export competition for ethanol, we export a good deal but I don't think it'll be poor but we'll probably have a little bit more competition coming out of South America. So domestic demand, I do expect to go up next year. I think that next year's crop across the world will be about the same size as this year, plus we already know South America, which harvests theirs later and what they're harvesting right now and into spring will be our competition at the beginning of our exports, so I expect exports to stay in about the same arena. And if that happens and this is a big change from the numbers I thought would happen when I was talking this past winter, whereas I thought ending stocks in 19-20 will go down a little bit, if we have this kind of acreage, with this kind of yield, a trend yield, I now expect ending stocks to be higher at the end of the 2019-2020 year than now. If that happens, that's gonna make prices struggle. They could possibly even be lower. But I think there's a little bit more upside risk than downsides, right? So I'd say the range in that price is probably 3.40, on the downside, my mean is 3.50 but there's upside potential in that 3.70 without a real bad yield. Looking at Michigan a little bit, our trend yield, I would expect to be about 164 bushels, if you see, you go back four or five years, we had 162. Not quite as good as yield since, but we can explain last year's yield with a wet spring, of the dry summer which then turned into wet fall and hurt Michigan yields. Although Michigan is on an uptrend and their rate of growth is just a little bit slower than the country as a whole, and part of that is just due to the bad year last year where the country had a better year last year. How does this match up with December futures? You take 35 cents off of this and that kinda matches up but these futures prices are probably a little bit better than the fundamentals I just suggested, which means if we get some of this back, I'm not real high about pricing 2019 crops either, but if we get back in this region in here at all, it might be a starting point for pricing. Some people are saying $4, which may make it a little bit harder to get the $4, but I think there's a reasonable chance. We'll have other chances to price today's levels, if we need to. Questions on corn? I'll go into wheat, but if you get some, go ahead and interrupt me. Wheat's like corn, it's coming in a little bit higher levels. Wheat's taken a beating. Part of that's on demand and we just have a lot of wheat, as we'll look at it, as we go through. We planted a little more wheat last year, after being down for a number of years. Michigan planted last but other people planted more and I'm gonna go through wheat fairly quickly. So we plant a little bit more, plus we had, excuse me, a better yield countrywide than we had the previous year but not near a record yield as about trend. We brought in last, had a bigger one, so we had a bigger supply going into the year, and this would've been last July. Food use is going about the same as a year ago, not feeding very much. Exports are a little bit better than a year ago, we'll look at that. The world crop is down a little bit but they're down a little bit from a very big crop. Where we lost production somewhat is the European Union was down and the Russian crop was smaller as well. But exports have not been running real strong the rest of the world seem to have a good deal of stocks. So we're running, I do think we'll get back to close to next year's, and I say that because if we look at unshipped sales, it gives us a pretty good idea that that's running a little ahead of exports to date, so by the end, I think we'll come in a little bit about the same number of bushels. And we expect world ending stocks to go, be down a little bit, which is slightly positive but the market hadn't really picked up on that yet. So better exports, ending stocks down just a little bit, which puts prices up just a little bit. Now I think very few of our producers are holding their 2018 wheat, but it is real important, as we look into 2020. The wheat market is, this is a transfer to one year to the next, so I wouldn't really be storing wheat but I think very few producers are. If we look into next year, this 31.5 winter wheat acres is the fewest we've planted since records began, and that's about 1919. Michigan, however is planting about 90 more than the previous report we got, the December report, but only about 80,000 more acres of wheat than we planted last year, we planted about 510,000 acres a week, winter wheat, and that's the only kind of wheat we do. We don't know the split of that. Other spring wheat, we're expecting to be down. Durum, we expect to be down but these are smaller numbers. And if we look at all wheat, we're expected to be down that almost two million acres we talked about, or over 4%, and this all wheat number is also the lowest on record since. Well the winter wheat record started in 1909, the all wheat started in 1919, and these are the smallest amounts we planted since those points in time. Wheat yields. This is my projected yield. Trend yield, as we go into next year, just over 48 bushels an acre, not too much different than last year. We're bringing in less, we'll produce just about exactly the same fewer acres but a little bit, the trend yield's better. Food use expected to grow at about the same rate, exports about the same. So I do expect there to be a decline in ending stocks and maybe a slight increase in prices. The futures market, as we look at July, is less than this. Now this is winter wheat futures, though. Spring wheat prices and durum are a good deal higher, and hard red winter is just a little bit higher but not much. So right now, the futures market's lowered my fundamentals which, in my mind, I don't see any pricing opportunities for wheat right now. So if we look at soybeans. Again, higher prices but not as a high as they were, kinda what's the new norm. Soybean futures have been disappointing for some time. This drop here, of course, was when the tariffs were announced. We announced tariffs and then China announced tariffs. There is a big spread, for most of this period, there was a spread between South America soybeans and US soybeans, which equaled the tariff. There has been sales, China still does need soybeans from the US. They don't need as many beans toll as they thought they were for a couple of reasons. One is they've had some really bad swine disease, which not much information's out, but we suspect that's one of the reasons that they're importing less, they won't need as much. Plus they've become pretty creative at other protein sources. Plus they made, of course, they purposely had bought more from South America, because after the tariffs they've imposed, it's slightly cheaper. If the tariffs come off, this will gradually change. I do expect that to be settled but I don't know when. I am worried about the long-term effects. We will not get back the losses we have to date, but hopefully we can curve futures losses as we go into the future. So we planted 89.2, basically we planted almost as much corn as, soybeans as corn, and that's because last year, it was the opposite. Soybean prices looked like, when we planted the soybeans was before the embargo really thing and it really looked like we'd have higher returns to soybeans than corn, before that sharp price in soybean prices. If we look at the yields, one, two, three, four, five, just like corn, by far, the five biggest yields in the last five years, which is a fairly substantial part of the low prices along with all of the other reasons. You know, usually there's a poor crop every few years, which doesn't help the individuals that have the poor crop, they'd still be better off from a big crop, but does carry ending stocks down. Michigan harvested 48 bushels per acre. We had the five biggest crops, as we talked about. We brought more in. We produced more, we had more, crushings are more. Exports, the world soybean production was a record. Even though it's not as big a record as we thought, the soybean had a, in Peru, in Peru, Brazil, is less than we thought but still huge. Exports have been very low. In this one, export sales are quite low as well. So if we look at export supply and demand to date, ending stocks are expected to grow in the world, and of course, that's always a poor sign. Notice stocks will be lower in Argentina and Brazil, than last year, even with those having considerably bigger crops, and that's because they've gotten a bigger chunk of the China trade. China had been increasing their imports by 3% a year, so this 94 was 3% bigger in a previous year, which was 3% bigger in a previous year. The original goal was for them to increase that again 3%. The hog disease probably would've come either way, so this number might not have increased, but right now, they're only expected 88 and that's, it takes six million metric tons, you multiply that times, close to 40 millions bushels, so six times four, so we have 240 million bushels of soybeans that China isn't gonna use. So we go through that. Supply is up, ending stock's up, and we're looking at ending stocks in total, like we've never seen before. 22% ending stocks in use. Now in the '80s, we did have a higher percent of ending stocks to use, we just didn't have this big a number. And this $8.60, it might be a little high but seems to be what the market, we've sold an awful lot of soybeans to date, so we kinda know what the weighted average is. But when you go to 22, why the price is as high as it is, compared to history, where this ending stock's, even though the prices are not good the way they are, is a good thing they're higher but it's a little bit hard to explain with this kinda ending stocks for prices to be where they are right now. It was a bit of a puzzle that soybeans stocks were just as expected, so that didn't affect last year's supply and demand. Today we had a little bit of a rebound in the market, and as I go through the next section on planting, I think we'll see a little bit more of a rebound. Soybeans say, oh, on farm storage might pay, but again, you gotta look at the basis that's being offered in your local area, in July versus May. So this storage decision is getting really close there. If we think we'll have some rebound in futures, and I think we'll probably have a little bit, there's a choice between storing it and waiting for both higher futures and at least as good a basis, or locking in a basis. But the basis has quite weakened soybeans across the whole country, which worries me some. - [Monica] Hey Jim, we got a question that came in. - Sure. - [Monica] Regarding our local markets, which do you place more importance on, world ending stocks or US ending stocks? - [Jim] In the shorter run, what's happening right now, I'd place more emphasis on US because our exports kind of account for the world one. So in corn, knowing the world one being a little less is still somewhat positive, and soybeans, both of 'em being bigger is kind of a negative. Also, the probably the more accurate one is the US number is the other reason why I'd put a little bit more emphasis on it, in ending stocks, than the world. I tend to look at the world ending stocks for kind of a direction, and I look at the US ending stocks more to try and think, look at what prices are gonna be here in the US. Soybean, I hope that's an answer but we can follow up later, if needed. We expect to plant those almost four million less acres of soybeans. Again, we may have to fall back to those soybeans. Michigan is expected to plant 100,000 less acres, and if you look at corn and soybeans combined, we'll have 50,000 less acres in corn and soybeans. A few places are up, it's kind of amazing. North Dakota and South Dakota are awfully positive right now. Iowa, at the beginning of March, was positive, but that number, that increase was all corn, with soybeans staying the same. It's yet to be seen, I think we'll see some shift because that's one of the places there's some flooding. This 18.6, if we look at 84.6. If we look at this trend yield, just under 50 bushels an acre. We look at normal preventive planting, which is usually, not preventive planting, excuse me, something happens and it doesn't get harvested. There's no reason that that spread might change this year but this top number may change. So we brought in huge beginnings stocks. We expect to produce substantially less, do a lower yield and lower acres, but due to the beginning stocks, we expect to have as much on hand at the beginning of next year as this past year. Questions oughta hang in there, and maybe a little pessimist on this year crushing number here, as the livestock numbers will be about the same, as I discussed. I think we'll see some recovery, and this is the hardest one to guess right now. That's basically, I put that number in, I think it's gonna take China a while to get their need for our soybeans back and I can't see South America cutting back on their acreage at all next year, so it'll be a little struggle getting back. People estimate everywhere from about the same as last year to almost a hundred million bushels more than that. - [Monica] Hey Dr. Hilker, we got another question. Would you expect the basis to shrink in Central Michigan with the CFS if (mumbles) coming online? - [Jim] I think, especially over time, I think they'll be extremely useful to Michigan 'cause we have to shift so many out of state. But that's probably gonna take well into the 219-220 year for that to happen. But longer run, I think that is extremely positive for Michigan for a whole bunch of reasons. One, I do think it will help the basis and even if it's, you know, that 10 or 15 cents, if it does it over a period of time, that's huge. If anything, it may mean cheaper feed for Michigan livestock and that kinda works in a circle. They're cheaper to feed, the better we'll be able to sustain our livestock industry, the better we can sustain our livestock industry, the more soybeans we can grow in that little better basis. Our overall price is still, of course, gonna be determined by a national and international market. That plant, when it's going full run, as I understand, will be about three times the size as their other crop, other plant. So it really depends on when we can get that thing finished. As we go through here, I do expect a slight decrease, but I'm not very optimistic for next year's prices. If I, something's happened here. I don't know what I did but I can't seem to, here we go. - [Monica] We have another question, too (giggles). - [Jim] Go ahead, do it. - [Monica] For Michigan farmers, do you see any profitability and viable alternatives to planting corn and beans for the next few years? - [Jim] I don't see a lot of alternatives. I see our corn base is staying pretty well, we might get hurt a little bit on a little bit less fed to dairy, but that should turn around again with the opening of the processing plant in St. Johns, I think we'll get our numbers back fairly quickly. I think, for individual farmers, there might be some on the side. I think, maybe some of, you know, we can't do a lot. In the areas where you can, you keep a close eye on the dry beans and the sugar beats but they're such small acres, it doesn't take very much to change it. So I don't have a pan to sea to come through. On the '19 beans, I think if we get back, by the way, and I'll try and come back to longer on here, and I'm going to in just a second. If we can get back in this range here, we might wanna do some pricing, and certainly as we go here, but I'm not real excited about the pricing right now. The second part of, is there a different crop to grow? And we do have more alternatives than most Corn Belt states, is what's gonna happen to prices over the next five years. So what I have here is a bunch of forecasts, including my own forecast. You know, kinda what's the new normal. We look at this bottom line, most people are thinking just under $4 for cash. This is an average for the year type thing. This is a number that the top third of producers can probably do okay at. So let's say what you learned on all the other crop webinars on how to be more efficient and do things is gonna be critical over the next four or five years. These prices also suggest that land, in order to get the cost, land rents are gonna have to come back up. My soybean projections in the market are with the idea that soybeans will go back to about 2.5 times the price of corn, which they clearly aren't right now. And the reason they go back to that in general is because that's a number that gives us about equal returns per acre for the country as a whole, and the individual farmer might be a little better growing corn than soybeans. So we're not at the corn prices out five years, we're not at to soybeans prices I expect to be. Unfortunately, wheat prices, right now, they're really low, but the forecast is for 'em really to be the same place they've been the last few years. So that's the end of my schedule. Comments? If we have other questions. - [Monica] If we have any more comments out there, please put them in the Q and A box. As of now, Jim, you've answered all of them that's been submitted. - [Jim] Well I appreciate you putting this together, Monica. We're gonna have to watch this real closely, these numbers, to change quickly. My guess is we may dry out a little quicker than some places, although it doesn't look like it right now. So I wouldn't be ready to switch to soybeans yet, I'd probably still be trying to get that corn in if I can. - [Monica] What do you expect from government payments in the next few years? - [Jim] Okay, there'll probably be a little bit of, and we already kinda know our payment for the '18 now. We just got the Farm Bill passed not too long ago. It looks like signup will be September 1, and that will be for the '19 and the '20 crop, corn crops, soybean crops, wheat crops. You'll sign up at the same time for both of those crop years. It looks like my initial thing is that the price loss coverage will be better than ARC this time, where ARC was clearly better in the previous one. And the reason is that ARC works good when you have high prices and it's falling, and then maybe we have a poor yield. Or at low prices, and if anything, they'll be marginally climbing over the farm bill. So if we look at that, the rate that the government will start subsidizing at is the average price between $3.70 cents. As you see, we're looking at the '19 crop probably being underneath $3.70, and then kinda just a little bit over it, and when the forecast is just a little bit over it, that's a higher odds of it. So I could see anywhere from zero to 20 or 30 cents per bushel. Of course, that's per bushel given your five-year FSA yield, 80% on base acres. If you have not updated your FSA yield, please do so. If you're not doing it every year, you need to. It's a funny way they're doing it, but if your five-year average this time is higher than what it was for the 2014, you can use the higher yield. If it's lower, you get to keep your 2014 farm bill yield. So it's worth updating, it can't hurt you, and in this day and age, if it goes up what you're getting paid on, even two or three bushels over thousand acres, starts adding up to real money. - [Monica] All right, and another question is what percentage of October, November 2019 beans should a farmer have sold now? - [Jim] Using hindsight is, you know, last May, 60% of it, but of course, we didn't know at that time. I can see where someone may have priced 15 or 20%, but that's easier said than done. If we look at, you know, this market here, there hasn't been any real times where oh, I have the price sum like there was up through May, and I expect some producers did that. And in this upswing, we didn't know is gonna fall, so when you see what they've should've, it'd been nice to have a hard number, but I can't honestly say that there was some real good signals that you'd have much more price to maybe to 15 or 20% you did back here. Now, you know I'd love to have another 15 or 20% here but that's really using hindsight, whereas this was a pretty good price up here. I guess I'd say the same thing if I went back to December, December corn, it would be nice to have more price but there wasn't very good signals after May.

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