Corn Commentary

Ups and Downs, Highs and Lows

Corn growers have seen some pretty good prices over the past several years, but the downward trend this past year for a record crop is expected to be the norm for the next several, according to Patrick Westhoff, director of the Food and Agricultural Policy Research Institute (FAPRI).

afbf15-westhoffSpeaking at the American Farm Bureau meeting last week, Westhoff said that due to corn prices dropping to levels not seen in years, farmers will plant less corn in the next two years. More than 90 million acres were planted in 2014 and he expects less that 88 million acres will be planted this year. While Westhoff expects average corn prices to remain low by 2007-2012 standards, “but still well above the level we saw before 2007.”

The demand picture for corn is high on the livestock side, but low on the ethanol side. “We have global demand growth in the animal sectors, here and around the world,” said Westhoff. “But perhaps weaker growth, if any at all, in biofuels - depending on policy, oil prices and a lot of other things we can’t possibly know.”

On the export side, Westhoff says there is a lot more competition. “The high prices of the last several years kicked off lots of supply from Ukraine to Argentina and that’s not all going to go away over night,” he said. And while China is a huge source of demand growth, Westhoff says “the good news is it’s growth, but the bad news is it’s not as fast as it has been. They’re looking at 6.5 percent growth next year.”

Westhoff concludes that the ups and the downs are always dependent on factors beyond our control. “As always, weather, oil prices and other factors will drive annual swings in prices.”

Listen to Dr. Westhoff’s comments here: Presentation on crop outlook by Dr. Pat Westhoff, FAPRI

What to Expect When You’re Expecting (Next Year’s Crop)

BabyCornCorn farmers might be wise to take a cue from a certain sector of their counterparts in traditional business sectors and learn the value of expectations management.

In 2012, farmers felt the brunt of their own success as, after years of continually pushing the boundaries of how much they could grow using fewer resources, a massive drought hit the Corn Belt hard. Fields of young corn plants, the beginning of what many anticipated to be a record corn crop, withered in the relentlessly dry heat. Corn production powerhouses, including Illinois, Iowa and Indiana, found their crop would not meet initial projections.

For their inability to (literally) make it rain, these farmers faced massive cries from media outlets’ sensationalized stories. Ever vigilant in their quest for higher ratings, many journalists eschewed responsible research in favor of “commonsense” commentary, crying over and over that consumers would be shocked when they saw their grocery bills come fall.

From their self-claimed moral high ground, media mercenaries lobbed a frenzied attack. Will Americans starve to feed their cars? Should draconian rationing measures be instituted? Were the Mayans right?

With the USDA’s annual crop reports released, a clearer picture of the 2012 crop is forming. Corn farmers, who faced a serious adversary in Mother Nature, managed to grow 10.8 billion bushels of corn. No, the crop did not break all previous records, but it made the top ten lists.

Despite the worst drought since the Dust Bowl, farmers raised the eighth-largest corn crop since the United States started keeping records. Through better seed varieties, developed through biotechnology, improved practices and cutting-edge technology, our nation’s corn farmers fought back against Mother Nature’s assault.

They struck major blows at key times. Iowa took the front despite the drought, growing 1.87 billion bushels of corn. Minnesota and Nebraska stepped up production and buttressed the crop, growing 1.37 and 1.29 billion bushels respectively. Even Illinois, who saw their normally chart topping yields shrivel in the sun, made a major contribution to the nation’s overall totals, producing 1.28 billion bushels.

The lesson therein? Corn farmers fell victim to their own success in 2012. While striving to produce even more bounty year after year, their achievements became commonplace. Thus, when these over-achievers faced a natural disaster, their efforts were met with backlash instead of understanding support. When their fields suffer, farmers suffer. Yet, this fact was largely ignored.

The eighth-largest corn crop on record does not generate the sort of excitement that a record-breaking harvest may have. It does show the strength and reliability of U.S. farmers. Even in the face of a drought that would have decimated the crop only decades ago, they succeeded in providing a top ten crop. Expectations placed upon America’s farmers have obfuscated the triumphs of 2012.

Sadly, it is a story that deserves telling. Though neither glamorous nor sensational, U.S. corn farmers can provide a dependable abundance that Americans can count on for food, feed, fuel and fiber. Maybe this does not make a headline, but it does provide for a secure tomorrow. That’s an expectation farmers are proud to meet.

As the National Mood Darkens, Agriculture Must Provide a Strong, Unwavering Light

This election day, a substantial majority of Americans believe that the country is headed in the wrong direction. Only five days ago, Rasmussen Reports found that only 39 percent of voters believe the country is actually on the right track. The negativity that has descended over the country hangs like a nearly palpable dark cloud, shading perceptions and obscuring the view of the horizon.

For farmers, a plethora of problems loom large on that horizon, threatening the industry which they have labored for decades to build. The shadowy figures resemble monsters. The drought menaces productivity gains or, at the very least, the perception thereof. Hard-fought battles to grow markets for their crops no longer seem like memories. The fog of fear creates doubt.

No longer able to clearly envision the brighter tomorrow that once inspired passionate pride in  agriculture, a strong biofuels industry, an abundant supply of healthy foods and a resurgent rural economy,  short-sighted attacks from launched under the cover of night lunge from reactionary corners.

Keenly aware of the cyclic moods of Mother Nature, farmers understand that a year of drought does negate centuries of innovation. Now, more than ever, this vibrant viewpoint needs to shine through the morass, leading Americans forth on the long-charted path toward that crystalline vision.

Instead of engaging the willfully obtuse in a never-ending debacle of a debate, farmers need to appraise arguments against their triumvirate of triumphs, ethanol, biotechnology and production advancements, with an eagle’s eye. Even though it may seem illogical, certain sectors have tied a blindfold around their own eyes and plugged their own ears rendering themselves unable to contemplate evidence that might contradict their anti-agriculture agendas.

Then, after writing off the screeches of the intentionally obtuse harpies, farmers can focus with pinpoint precision on the rock solid record of success. Repeatedly, American agriculture has set the bar far beyond what many believed it could reach. Repeatedly, it has vaulted well over that bar, soaring to greater heights time and time again.

Farmers set out to build an ethanol industry that would provide a new market for their crops, spur rural economic development, increase domestic energy production and decrease air pollution. Today, they have already achieved every one of those goals. In five short years, a booming industry has improved the fortunes of farmers and their communities at an exponential rate.

When critics attack these achievements, often detracting from ethanol’s success to draw attention from the lack of their own, American agriculture must defend its record with pride instead of apologizing for a single year of mild production setbacks. The rains will come. The corn will grow. It is crucial to the continued success of agriculture and of rural America farmers that the demand built through an incredible investment in ethanol remains strong.

Instead of falling prey to the demons of doubt, American agriculture should shine like the beacon, illuminating the increased employment, improved food and energy security and economic advancement that farmers have built through innovation and hard work. Farmers chartered the right course years ago. Now, they must lead others who got lost in the fog back to the path toward a brilliant tomorrow.

Mark Twain Would Have Liked Ethanol, Maybe Even in a Car

Beloved American author Samuel Clemens,Slide1 known to the world as simply Mark Twain, led a storied, colorful and sometimes dangerous life. It was one of these near misses with catastrophe that led to the now famous line “The reports of my death have been greatly exaggerated.”

 This quote seems to ring very true for ethanol fuel today as well. To read the volume of tripe being spread about by certain anti-ethanol factions in the grocery, environmental and big oil industries you would think ethanol is dead indeed.

 Thank goodness the truth is much like Mr. Twain and proves to be pretty resilient over time. In the petroleum world there is one particular publication, albeit published only once a year, that is known for putting the spin aside and addressing energy issues in a realistic and truthful manner.

 ExxonMobil’s “Energy Outlook,” the company’s annual forecast about the industry, which is set to be released any day, points to increased adoption of wind, solar and biofuels.  Exxon executive Andrew Swiger stripped off the rhetoric regarding alternative energy sources at a recent conference while giving a sneak peak of the “Energy Outlook.”

 In his comments he reported biofuels are expected to grow at a rate of 9.6 percent from 2005 through 2030. Up from 9.3 percent a year ago, and this at a time when overall energy demand is as flat as breakfast at IHOP. While wind and solar also grow, oil and coal are on the decline.

 The next time a naysayer tells you ethanol is dead or alternative energy supporters are crack pots, remind them of these other words of wisdom from Mr. Twain: “A person with a new idea is a crank until the idea succeeds.”

High Oil Prices Drive Need For Alternative Fuels Expansion

oil field 2 - iranAn American Petroleum Institute publication out this week contains two unrelated but ironically intertwined stories. The first – an opinion piece from the Washington Post casts a stone at the U.S. Department of Energy, taking them to task for funding programs to reduce our reliance on petroleum and efforts to speed the transformation of the nation’s vehicle fleet to alternative sources.

 The second article quotes the investment bank Morgan Stanley which has raised its forecast of U.S. crude oil price to $105 (U.S.) a barrel in 2012 from $95 due to tightening spare capacity and growing world demand.

Through its Clean Cities program, the Energy Department will use $300 million in economic stimulus money for “petroleum reduction projects.” According to the agency, the funded programs will “speed the transformation of the nation’s vehicle fleet” by putting 9,000 alternative fuel vehicles on the road and creating 542 refueling stations for them. (more…)

Outlook on Corn Production

The big guessing game of how much corn and soybeans will be grown this year continues. Weather has been out of the ordinary in some regions and it’s interesting to note that some midwest areas have been having one of the coolest summers on record. So what should people know about where we’re at and why should they care?

Last year we heard all kinds of hysteria over turning corn into ethanol and that somehow that was like taking food out of the mouths of people. Pure emotional tripe but fueled by fear mongers with an agenda. Facts weren’t important to them but time and the truth does tend to show how false a lot of those claims were. So it is important for consumers to get good information to not only educate them but alleviate fears they may have.

So, how are things looking this year? USDA releases “official” production estimates but a lot of analysts produce their own. This post started when I read the latest outlook from Farm Futures.

Bumper corn and soybean crops are still possible in 2009, despite a very unusual growing season, according to the latest Farm Futures survey of U.S. farmers.

Corn production could reach 12.545 billion, the second biggest crop in history, with soybeans setting an all-time high at 3.275 billion.

USDA reports 2009 production Aug. 12, in a widely anticipated release that features the agency’s first estimates based on in-field surveys, not statistical guesses. The government also will update acreage for corn in seven states where planting delays made its June 30 estimates uncertain.

Farm Futures found a 2 million acre drop in corn plantings from USDA’s June survey, with the total falling to 85.04 million. But farmers also reported above average yields of 160.3 bpa, compared to the current USDA statistical guess of 153.4. Farm Futures production estimate is 255 million above the July government forecast.

Farm Futures put the average U.S. soybean yield at 42.8 bpa, slightly higher than USDA’s trend forecast.

Sounds to me like we’re going to have enough corn and soybeans to meet food, fuel and export demand. Hopefully that will relieve your worries.