MARKETING STRATEGIES

Initially I planned to plant more corn next year. Now, with higher fuel costs and new-crop soybeans at $6.70/bu., I'm not sure I should switch,” said an Iowa farmer at a recent meeting.

My own acreage polls, taken at seminars this winter, show that a lot of farmers who had planned to plant more corn in 2004 may be changing those plans as new-crop soybean futures bid for more acres.

I've outlined the 2004-2005 corn and soybean supply/demand possibilities for the next planting season in the accompanying tables at right. However, these scenarios will likely change again by planting time.

Key factors that need to be monitored:

Weather this spring will have a big impact on total planted acreage and how many acres will be planted to each crop. With an early spring, total row-crop acreage could jump by 2-3 million acres as farmers pull land out of pasture and hay to plant more corn, soybeans and spring wheat.

Energy costs may determine the final corn acreage. With natural gas up 12-18% since last fall, nitrogen costs will be higher and anhydrous ammonia supplies may be limited. For farmers who didn't get anhydrous applied last fall, it may be easier to plant soybeans or spring wheat.

Cash corn, soybean and wheat prices always seem to influence new-crop planting decisions as well. If one commodity, like corn or soybeans, goes up disproportionately, it will result in more new-crop planted acreage.

USDA's annual outlook conference will be history when you read this, but its impact on prices and planting is always substantial. USDA has consistently underestimated soybean usage the last five years and may not want to make that mistake again. A bullish USDA conference would likely result in a larger-than-expected increase in row-crop plantings.

Alan Kluis is executive vice president of Northstar Commodity Investment Co. If you have marketing questions or want more information, write: Northstar, 1000 Piper Jaffray Plaza, 444 Cedar St., St. Paul, MN 55101; call: 800-345-7692 or e-mail: aginvestor@agmotion.com.

What To Do:

  1. Plant crops that will maximize production. Long term, the markets and profitability tend to even out. The efficient producer who strives for maximum production at minimal cost will gain more long-term profits.

  2. Use new-crop rallies to make additional new-crop sales. If you're not up to 30% sold at this profit level, consider some new-crop hedges or at least buying new-crop puts. Sure, it could go higher. But if planting goes perfectly this spring, these are some great price levels at which to have some new crop locked in.

  3. Take a look at crop revenue insurance. With new-crop corn and soybean futures at some of the highest prices we've seen in the last decade, the amount of crop revenue you can lock in is at, or close to, record levels. You've got higher prices — now make sure you're locking in a higher income.

U.S. Soybean Supply & Demand Summary

Actual Estimated Northstar Projections 2004/05 Projection
2001/02 2002/03 2003/04 Bullish Neutral Bearish
Planted Acres (Million Acres) 74.1 73.9 73.4 72.0 72.5 73.0
Harvested Acres (Million Acres) 73.0 72.4 72.3 70.9 71.4 72.0
Yield (per acre) 39.6 38.0 33.4 35.0 36.5 39.0
Production 2,890.8 2,751.2 2,414.8 2,481.5 2,606.1 2,808.0
Beginning Stocks 248.0 208.0 178.0 125.0 125.0 125.0
Imports 2.0 5.0 8.0 5.0 5.0 5.0
Total Supply 3,140.8 2,964.2 2,600.8 2,611.5 2,736.1 2,938.0
Crushings 1,700.0 1,615.0 1,455.0 1,600.0 1,600.0 1,610.0
EXPORTS 1,064.0 1,045.0 900.0 756.0 826.0 915.0
Seed 90.0 89.0 90.0 90.0 91.0 91.0
Residual 79.0 34.0 33.0 33.0 33.0 34.0
Total Use 2,933.0 2,783.0 2,478.0 2,479.0 2,550.0 2,650.0
Ending Stocks 207.8 178.2 125.0 132.5 186.1 288.0

U.S. Corn Supply & Demand Summary

Actual Estimated Northstar Projections 2004/05 Projection
2001/02 2002/03 2003/04 Bullish Neutral Bearish
Planted Acres (Million Acres) 75.8 79.1 78.7 79.0 80.0 81.0
Harvested Acres (Million Acres) 68.8 69.3 71.1 71.1 73.2 74.1
Yield (per acre) 138.2 130.0 142.2 134.0 139.0 143.0
Production 9,508.2 9,009.0 10,110.4 9,527.4 10,174.8 10,596.3
Beginning Stocks 1,899.0 1,596.0 1,087.0 978.0 978.0 978.0
Imports 10.0 14.0 10.0 10.0 10.0 10.0
Total Supply 11,417.2 10,619.0 11,207.4 10,515.4 11,162.8 11,584.3
Domestic Use 7,915.0 7,939.0 8,255.0 8,000.0 8,025.0 8,200.0
Exports 1,905.0 1,592.0 1,975.0 2,050.0 2,075.0 2,100.0
Total Use 9,820.0 9,531.0 10,230.0 10,250.0 10,100.0 10,300.0
CCC Inventory 6.0 5.0 3.0 3.0 3.0 3.0
Ending Stocks 1,591.2 1,087.0 978.0 465.4 1,062.8 1,284.3
All figures are in millions of bu. unless noted.
Data for actual and estimated columns is USDA, all other figures are Northstar projections.