It seems like it has been a long and cold winter and I am sure all of us are looking forward to spring. Along with the coming of spring, farmers need to decide how many acres of corn and soybeans to plant. The government has predicted, on its first go-around of planted acres, that corn and soybean acres will be almost the same at around 90 million acres each. We believe when we see the final planted acreage guess from USDA on March 29th, bean acres could be even higher than corn. Looking at November soybean futures, they are around $10.20 and corn December futures are around $3.95 (at the time of this article). The ratio between corn and beans is 2.58. The last we have seen from economists is when the ratio is higher than 2.30; it says the economic advantage is to plant soybeans. Cash soybeans today in Madelia are $9.46, and cash corn is $3.39 for October. We know everyone’s cash flow is different depending on many things, but we believe the profit advantage would go to beans at these prices. Also playing into the acreage spread between corn and soybeans, we believe, will be the lack of availability of some farmers to get all the operating loans they are looking for to plant the crop this spring. We know most farmers in our area plant 50/50 corn and soybeans, but many farmers prefer to plant a higher percentage of corn for several reasons. Depending on the acre spread between corn and soybeans could have a large effect on their respective prices next fall.
The main reason we have seen the run-up in both corn and soybean prices this winter has been the drought in Argentina. It is almost certain South America’s corn, and soybean harvest will fall below last year’s production. How much is still the big question. There has also been a large amount of rain in Brazil delaying their soybean harvest, maybe more important, has delayed planting of their second yearly corn crop. This is very important because if it gets too much later, they will not plant as many corn acres following soybean harvest. If it gets late, it will get too dry for high yields to justify planting a second crop. Of course, the weather patterns could change in South America and drive our prices back down to post-harvest levels. We have been purchasing more new crop this year than last year with this rise in prices. We believe that these prices deserve to be rewarded with some farmer sales. We have many different contracting options, so please contact one of the Crystal Valley Marketers to help you find a contracting method that will work for your farming operation.
As I write this article, the 199A has been changed. The section 199A has changed for coops back to the way it was before the new tax law in December. Because of this change, Crystal Valley will receive a tax break, some of which will be passed back to our grain customers. If you take the average over the last five years, we have passed back $.064 per bushel on both corn and soybeans, with last year’s pass-through of $.16 per bushel. We are not accountants and don’t claim to know how this will affect each of you personally, but we believe with the section 199A, there is a real tax advantage to be selling your grain to a coop like us. Because of the 199A, we have been doing many more direct ship contracts into non-coop processors. Again, please contact one of our Marketers to see if we can help you with a grain sale into a non-coop processor. It could have real ramifications on your next year federal income taxes.
Another new thing that has just popped up is a possible trade war with China. If this talk escalates, it could become a real blow for agricultural products. In our area, the price of soybeans and pork could take the largest hits, and of course, if pork production declines, corn would have an adverse reaction to price with less corn going into feed production. Stay tuned most of this is talk as of now but could become a real issue as we move into spring.
Hope your spring is productive!View News