Technology and Farming Practices Expected to Outpace Lost Acres
What’s Happened….
On November 7, the USDA released tables from the Agricultural Projections report from 2023 to 2034. The projections, according to the USDA, reflect a composite of model results and judgment-based analysis which were prepared August through October of 2024. Interesting were the figures suggesting declining corn acreage and higher yield while both soybean yield and acres will increase.
Why this is Important….
The old saying is “they’re not making any more acres.” The implication here from a production perspective is that it will take an increase in yield to keep adequate corn supplies available for consumers. The USDA tables indicated planted corn acreage at 94.6 million will eventually decline to 88.5 million; yield will increase from 177.3 bushels per acre (bpa) to 198; production will grow from 15.341 billion bushels (bb) to 16.060 bb; ending stocks will hover in the vicinity of 2.2 bb.
For soybeans, the USDA tables indicated planted acres will gradually grow from 83.6 million to 86.5; yield will increase from 50.6 bpa to 56.5; production will rise from 4.162 bb to 4.835; most new soybean acres come from corn; ending stocks will remain near 350 million.
If these projections prove close to accurate, it does suggest corn prices could be volatile. Anticipating a higher yield to meet demand while at the same time farming less acres leaves little room for production error. A disruptive weather event could quickly raise prices. The same may be said for soybeans. Growing demand and the need for more production suggest high price volatility.
What can you do about it?
Preparation is key. Prices tend to fall quickly after a rally. They do so because great farmers and great technology have pulled crops out of perceived (and real) difficult growing situations in recent years. Set price targets and allow them to execute. (Don’t cancel them when market prices get close.) Covering sales with call options could be important, especially in a year where prices continue to climb and short supplies become a reality. Consider purchasing puts to establish a price floor. In the end, strong cash sales covered with call options and unpriced bushels protected by puts will create a balanced marketing approach.
Find out what works for you….
Work with a professional to find the strategy or strategies that are best suited for your operation. Communication is important. Ask critical questions and garner a full comprehension of consequences and potential rewards before executing. The idea is to make good decisions for the operation and less emotionally charged responses to market moves, which are always dynamic.
About the Author: With the wisdom of 30 years at Total Farm Marketing and a following across the Grain Belt, Bryan Doherty is deeply passionate about his clients, their success, and long-term, fruitful relationships. As a senior market advisor and vice president of brokerage solutions, Doherty lives and breathes farm marketing. He has an in-depth understanding of the tools and markets, listens, and communicates with intent and clarity to ensure clients are comfortable with the decisions.
The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report. Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Examples of seasonal price moves or extreme market conditions are not meant to imply that such moves or conditions are common occurrences or likely to occur. Futures prices have already factored in the seasonal aspects of supply and demand. No representation is being made that scenario planning, strategy or discipline will guarantee success or profits. Any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to Total Farm Marketing. Total Farm Marketing and TFM refer to Stewart-Peterson Group Inc., Stewart-Peterson Inc., and SP Risk Services LLC. Stewart-Peterson Group Inc. is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of National Futures Association. SP Risk Services, LLC is an insurance agency and an equal opportunity provider. Stewart-Peterson Inc. is a publishing company. A customer may have relationships with all three companies. SP Risk Services LLC and Stewart-Peterson Inc. are wholly owned by Stewart-Peterson Group Inc. unless otherwise noted, services referenced are services of Stewart-Peterson Group Inc. Presented for solicitation.
Author
Bryan Doherty