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Acres & oil: 2011 crop factors

Jeff Caldwell 02/16/2011 @ 11:51am Multimedia Editor for Agriculture.com and Successful Farming magazine.

The biggest message from last month's USDA grain supply and production reports was that there's not much margin for error with this year's corn and soybean crops. The world needs a lot of both crops.

But, the same could still be the case next year at this time; that slim margin for error may be just as tight next year, making a big 2012 crop just as important as a big one this year, says Iowa State University Ag Marketing Resource Center director Robert Wisner.

"Early indications are that crop plantings this coming spring and normal yields would provide only a very modest easing of the tight supplies and that additional easing would be likely to occur in 2012-13," Wisner says.

Even if crop output's average this year, the economist says some demand factors could expand in future years, adding to the supply squeeze. "One should keep in mind several important variables that may influence the degree of tightness next season, including 2011 weather and crop yields in the U.S., China, former Soviet Republics, Europe, and South America," Wisner adds. "Also, with record or near-record high corn and soybean meal prices, it likely is only a matter of time before significant rationing of feed demand begins to occur."

So, what's it matter at the farm level? Farmers in Agriculture.com Marketing Talk say they're not making big changes to their plantings this year. "Because of my rotation, I am on target to grow 100 fewer acres of corn for next year," says Marketing Talk member Red Steele. "I have been burned enough times switching and watching the relative prices change on the non-contracted bushels, so I don't win."



That means the extra acres market-watchers say the market will need could come from double-cropped systems, farmers say.

"Basically, USDA is saying we'll match levels of 2008 for all acres of all crops.  From my understanding, the way to accomplish 2008 acres for 2011 we'll need to boost double cropping of wheat and soybeans," says Marketing Talk member GoredHusker. "We planted quite a few more acres of winter wheat than we did last year. I could see us matching or slightly surpassing 2008 plantings of all crops."

Beyond acres, Wisner says a key thing to watch moving forward will continue to be crude oil prices "which are influenced by the value of the U.S. Dollar and international political conditions." An extended period of inflated crude oil prices could throw off the balance enough to hijack the grain trade from its fundamentals.



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