With the meeting season winding down, and farmers beginning to plant 2012 crops, Auburn University Extension economist Max Runge — speaking at a central Alabama crops workshop — offered some tried-and-true advice: “Don’t let your rearview mirror be bigger than your windshield.”
Many farmers had bumper crops in 2011, while others were hit by drought and other disasters, but spring is not the time to be looking back, regardless of what occurred, says Runge. “We can’t look back — we have to look forward.”
There’s plenty to consider in the here and now, especially in a year in which commodity prices across-the-board are better than average, and corn, cotton, soybeans and peanuts all are competing for their place in the field.
“Crop rotation, crop rotation, crop rotation — I can’t stress this to you enough,” says Runge. “It’s going to be critical that we look more closely at crop rotations to help manage our fertility and to manage our traits and chemistries.”
As good as prices were in 2011, they could have been even better if not for record foreign production, and it’s important to remember that prices might not be as good this year for certain crops, he says.
“In Alabama, we were above the five-year yield average on most crops, and you know how impressive those numbers are if you traveled in the Wiregrass region of the state, where some corn tasseled out at about knee-high. And we saw a wide range in prices, wider than normal,” says the economist.
Going into the spring, some areas of the Southeast have received ample rainfall this winter, but other areas remain dry, including southwest Georgia and southeast Alabama, says Runge.
“We need more than 30 inches or 125 percent of normal rainfall to pull us out of these drought conditions. The drought outlook through the end of April says it’ll stay dry where it’s already dry. La Niña is working on its second spring, promising warmer and drier temperatures, so corn planting could be earlier this year. But long-range weather forecasts have to be taken with a grain of salt.”
About 40 percent of U.S. corn production is now being used for ethanol, says Runge, and that’ll continue to increase. “By 2016, we’ve got to get to 15 billion gallons of ethanol. For the past three years, China has been a net importer of corn, going from being a competitor to a customer.”
Average crop yields in Alabama haven’t always kept up with U.S. trends, he says, and two years of hurricanes and one year of terrible harvest conditions haven’t helped matters. “But the good news is the genetics and yield potential are there for us, we just have to bump it up. We can do well with our yields — the genetics definitely are there.”
There should be acreage increases in 2012 simply due to the fact there were prevented and abandoned acres this past year, he says. Also, about 1.4 million CRP acres were released last year, and some of those will be going back into production.
“Someone in southwest Georgia told me that bulldozers were running and wells were being dug to bring row crops back into production, so it’ll be interesting to watch these developments.”
While peanut prices have been spiking, Runge says he’s confident growers won’t overplant, as they’re also considering the importance of maintaining their rotations.
“Fertilizer prices are high and probably will be a little higher. Make sure you look at it on a per-unit basis. Diesel prices usually get higher in the fall, during harvest, so if you have the capacity to store, this might be a good time to do it.”
Looking at other inputs, Runge says crop insurance should be down slightly but land rent probably will be up. “There are pros and cons to consider on long-term contracts on land rent, but it might be worth considering if you can get it.”
Credit is available, he says, but lenders are trying to cover their risks, so they want to know a lot more about your inputs and returns. Some lenders are shying away from agriculture while others are getting into it on a larger scale.
“Looking at total costs, if we get pretty good yields, our break-even cost on corn is about $4, and on cotton it’s about 65 cents per pound. We have the opportunity to have a good year, assuming we get timely rainfall.”
There are many marketing strategies for growers to consider, says Runge. “Some people contract one-third of their crop at planting, one-third during the growing season and one-third during harvest. Some people will price enough to cover their variable costs, and some will put it on the truck and take it to the elevator to get a price.”
It’s hard to look back at last year’s prices and determine when would have been the best time to market a crop, he says, but expectations will have a lot to do with how the marketing year goes.