Market Outlook: Tips to Increase Efficiency and Profitability

feb2015coverEditor’s Note: Reports in this month’s Corn South Market Outlook are from Mark Welch, Texas AgriLife Extension economist, with Regional agronomist, Brandon A. Dillard, of the Alabama Cooperative Extension System, offering four points to help producers increase efficiency and profitability in 2015. The opinions and recommendations expressed are solely those of the authors and are intended for educational purposes only. The respective universities assume no liability for the use of this information. The final report is from the USDA’s National Agricultural Statistics Service.

[dropcap]U[/dropcap]SDA released preliminary numbers related to its longterm commodity projections last week. Among the information in the release were acreage projections for major crops. These projections are based on expectations related to macroeconomic conditions, normal weather, existing policy and no domestic or external shocks to agricultural markets. These numbers will be revised and reported again in February ahead of the annual Agricultural Outlook Forum in Washington, D.C.

For 2015, USDA expects planted corn acres at 88 million, down 2.9 million acres from 2014. Informa has released its projections of 2015 corn at 88.3 million acres. USDA projects soybean acres at 84 million acres, while Informa expects soybean acres to equal corn at 88.3 million.

Ending Stock Projections
USDA’s preliminary projection for corn use in 2015/16 is 13.745 billion bushels. With 88 million acres planted, a yield of about 169 bushels per acre will be needed to keep ending stocks level at the end of the marketing year. Using a trend-line yield projection since 1980 of 163 bushels per acre, planting 88 million acres would result in ending stocks about 440 million bushels lower in 2015/16 compared to 2014/15.



Market Overview
■ USDA projects acreage down 2.9 million from 2014.
■ Corn and soybean acres estimated to be very similar.
■ Ethanol sets all-time production high.
■ Cattle on feed up significantly since August 2012.
■ Marketing plan calls for pricing the first 20 percent of the crop.

Grain Use
Reports related to corn consumption were positive last week: corn ethanol set another all-time high for weekly production, broiler placements are up two to three percent and cattle on feed above levels from a year ago, marginally above last month and significantly up for the first time since August 2012.

Outside Markets
Lower energy prices led the Consumer Price Index lower in November compared to October, prices down 0.3 percent for the month and up 1.3 percent compared to this time last year. With inflation well below the Federal Reserve’s target rate of two percent, the Fed’s Open Market Committee stated last week that its
current zero to one-quarter percent target for the federal funds rate is appropriate and that current economic conditions allow them to “…be patient in beginning to normalize the stance of monetary policy.”

Marketing Strategies
My marketing plan calls for pricing the first portion of the 2015 crop this winter. With the recent uptrend in the market, I am ready to price the first 20 percent of the crop on a technical signal that the trend is changing.

Brandon Dillard: Profitability Tips
Regional agronomist, Brandon A. Dillard, with the Alabama Cooperative Extension System offers these points to help producers increase efficiency and profitability in 2015:

1.) Soil Sample. Soil sampling can save you a lot of money. If you sample on 10-acre grids, it will cost 70 cents per acre to run the soil analysis. It doesn’t take much fertilizer or lime savings to equal 70 cents per acre. In my opinion, this is probably one of the best years to look into variable-rate application of fertilizers, if you haven’t done so in the past. Most farmers will tell you that just from the lime applications
you can save enough money to pay for the soil samples.

2.) Think Outside The Box. I have had a few producers say that they are planting some of their fields in permanent pasture or in a hay/haylage crop. They believe there is more money to be made in producing a hay crop in the summer and feeding out calves the next winter. Of course, every producer has a different situation with fixed costs and bank freedom, but being able to look at alternative ways to make a profit is important in times like these.

3.) Calculate Budgets. A few minutes of sitting down and calculating expected input costs versus expected income will help farmers realize which commodity gives them the greatest chance for making a profit. Being honest with expected yields and input costs is the key for accuracy. Find row crop budget templates at

4.) Hedging. Hedging is something that most farmers probably don’t do enough. Hedging allows you to set a minimum price of the commodity you will sell and/or a ceiling of the inputs you will use. Hedging in combination with forward contracts also works well. By hedging you can set a price floor but not be locked out if the market goes up. Put simply, hedging is a “price insurance” for farmers because you can set a price floor but are not forced to deliver a commodity.

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