Farmers at Commodity Classic Talk Acreage and Cost Cutting
SAN ANTONIO, Texas -- With the calendar flipping to the month of March, farmers walking the aisles of this week’s Commodity Classic have the 2017 crop year and the hopes of it being profitable on their minds.
For instance, multiple farmers are sharing that despite conventional wisdom of more soybean acres being planted vs. corn in the U.S., their minds are made up to stick with their regular rotation of crops.
USDA projects record soybean acreage of 84.6 million acres, up 1.4% from 2016.
Scott Wettstein, a Lidgerwood, North Dakota, farmer says he plans to stay 50-50 on his corn and soybean acreage this year. “We’re not lop-siding either way. Our thought is that last year we tried a lot of different things on the farm regarding lowering input costs. We did it in a way where we could make a little bit of money growing corn. As long as we maintain a good yield with no disaster, we’re happy with this acreage split.”
Wettstein adds, “Last year, we saw a lot of fields that were planted to soybeans for a second year in a row. So, we don’t want to be too heavy on the soybean side. Potentially, if everyone overwhelms the soybean market, we can make more on the other side with corn.”
Bob Huttes, a Roca, Nebraska, farmer grows corn and soybeans. “We’re not changing what we do at all,” Huttes says. “We’re half corn and half soybeans on our acreage plans for this year. I could see where more farmers might plant more soybeans, with the prices where they are going into the season, but the prices are not attractive enough for us to go that way.”
Mark Westfall, a Woodstock, Ohio, farmer says he will not be chasing the soybean market with an acreage shift. “People who are under financial stress see a tremendous incentive to plant more soybeans this year,” Westfall says. “It’s less cost to plant and a better return on price at harvest. That doesn’t happen much for soybeans. For our operation, we’ve decided to grow an equal amount of both crops.”
The local basis is not making acreage decisions any easier for Wettstein. In Lidgerwood, the local soybean basis is $1.10 per bushel under the CME Group’s futures market all the way up to harvest, and then it narrows to 90¢ per bushel below the CME Group.
For corn, the local basis is 55$ to 60¢ per bushel below the board.
“My market adviser says normally you can pick up 10¢-per-bushel basis rolling positions, but the buyers are sticking to that wider basis through harvest,” Wettstein says.
Meanwhile, at least one seed company reveals that soybean seed talk is high-minded for farmers attending this annual meeting.
Drew Porter, DuPont/Pioneer’s director of product marketing for U.S. and Canada, says farmers want to discuss the corn-vs.-soybean situation.
“There has been strong demand for the company’s corn and soybean seed varieties. Certainly on the soybean side of seed buying the demand is high. We’ve had a lot of great discussions with growers about this subject,” Porter says.
Offsetting the interest in soybean seed, Pioneer recorded strong performance from some corn products last fall, increasing demand for that seed, Porter says.
Where to Cut
There’s no doubt that farmers are looking for areas to cut the costs of production. Many economic experts are saying that it’s very necessary for farmers to decide on where to cut, based on their individual operations vs. the trends in agriculture.
Porter says the key to farmers buying seed effectively is matching their farm’s profile.
“We’re very well aware as to where we are in the ag economy and the changing dynamics. We want to sit down with each customer to find the right package of corn hybrids and soybean seed varieties to meet the needs for their specific operations,” he says.
“Regarding pricing, we took special care to provide a broad range of price points within the given technology segments that our customers are demanding. We want farmers to have elite genetics for that top-end yield that they are looking for and to have strong agronomic products," Porter says.
“We appreciate that farmers are looking at their seed-per-acre costs and are trying to optimize them. With that said, I think producers understand that this is a central investment for revenue opportunity within their operations. Because of that, we’re still seeing customers choose the right hybrids for each and every one of their fields,” Porter says.
The Quant Brother Farm owns about half of the land that they grow corn and soybeans on, while renting the other half.
One way to cut farm costs is by paying variable land rent costs, Quandt says. “So if we make more money in any given year, the landowner makes more money. We are rewriting contracts so we don’t have to pay huge up-front land costs.”
Specifically, if the rented ground has a $150-per-acre base land rent and if the farmer makes over $100 per acre, every dollar after $100 is split 50-50 between the farmer and landowner.
“So, if the markets go up to $6 per bushel again, the landowner gets a kicker and we get a kicker,” Quandt says.
The North Dakota farmers say that cutting fertilizer costs is another area that they are targeting during these tight margin times of farming.
Farmers continue to move up their seed buying each year. This year is similar to last year, Porter says.
“A lot of business is done in the fall. This year is very comparable to prior years. We like to work with our growers while the combine is rolling and they have real-time information,” Porter says.
Multiple farmers at the Commodity Classic admitted that their 2017 seed purchases have already been made. Lower trait packages seems to be this year’s theme for negotiating with seed companies.
“We have been doing that the past couple years,” Quant says. “We are planting some conventional seed on highly variable land that isn’t going to yield enough to pay for that higher-priced seed. So instead of sticking brand specific, we get the cheapest seed that we can find to put on that lower-yielding ground.”