What to Plant & The US Dollar - Monday, 23 December 2013

 Many producers across the U.S. are struggling with the decision of what to plant next year.  Sometimes I think we hear so many different opinions from so many different “experts” that it makes it harder to make those decisions.  Not only do we have to consider what is going on here at home, now we need to look at the world and try to determine what crop will be most highly sought after by other importers of our grains the following year.  Financially which crop will make you the most money or lose you the least, a consideration not faced now for several years.  We do not have any sort of worrisome weather story for the bulls to run with and without that it’s hard to argue the need for higher prices.  All of us need to remember that the Funds drove our prices to phenomenally high values and also have the capability to do exactly the opposite.

South America as we know is raising a record breaking soybean crop, there has been some hints of hot and dry conditions in Argentina, Southern Brazil and Paraguay but will it be enough of an event to make a real difference?  What about that information would make any producer here in the U.S. desire to plant soybeans?  Maybe several things

  • The crop there is not “made” yet and many believe that if their crop would come up short of current expectations then the price could go much higher.
  • Some bankers have concern over the extremely high costs involved with planting corn as opposed to soybeans given the current price outlooks and are tightening down on some producers line-of-credit.  
  • Many growers have been running with a corn on corn rotation now for several years to capture the most net return, this soil should be primed for a bumper soybean crop. 

 

   

 

For some though, their decision will be determined in the spring when weather will dictate.  Yet for others more satisfaction is found in the production of a corn crop no matter what the bottom line may say.  In the table below you can see an example of an actual comparison between the revenue generated (after expenses) for one crop versus another, every situation is different based on your costs, the actual price your bushels are marketed for and your yield potential. 

 

 

If you would like to discuss how the numbers would calculate out for your farming operation please give Mike at Ag Performance a call, he would be happy to answer any questions you have, Mike can be reached at (641)562-2370. 

Soybeans continue to be the crop to watch.  With the way the current situation has set itself up we could see supply that is incredibly tight or a supply that over-whelms the market.  Chinese demand is very strong, because of that any fear of crop production issues in South America could send prices shooting higher and if an above average crop is harvested then today’s prices could look extremely high. 

 

The Fed met this last week and has decided to begin reducing the monthly quantitative easing.  This will have implication here in the U.S. and also abroad.  China has a big vested interest in our economy but so do several other countries such as Brazil and India who also are quite vulnerable to the economics in the U.S.  Brazil has one of the largest emerging economies in the world, when talk first was announced that the U.S. was considering this reduction their money the “real” dropped so quickly that their Central Bank had to put a currency intervention plan in place.  The US dollar has been on the rise as of late and is sitting at its strongest level since October 2008 and seems to be headed to yet another weekly advance.

 

 

All of us at Ag Performance wish you and your families a Very Merry Christmas!

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