As a farm operator or manager of an agricultural enterprise, how do you measure success? Is it how well you can feed your family from year to year, or is it the yield you produce compared to similar farms? What is the yardstick by which you may (privately) judge yourself?
Ethanol has seemed to have a run of bad luck lately. First, it hit the blend wall, the maximum of 10% of the total motor fuel supply. Then the recession curtailed some of the miles we drove and less gasoline was purchased. Then the EPA proposes that the Renewable Fuels Standard (RFS) be revised to curtail ethanol production. Then the government increases the fuel economy target for auto makers to ensure we continue on a downward trend of less gasoline being purchased. Never mind the woes of the petroleum industry, all of those dynamics combine to limit the growth of ethanol. It seems to have a bleak future, or does it?
The best rhetorical question asked on this day of significant USDA reports was, “Was there anything that surprised you?” In looking at the response of the market, there were obviously no surprises that were considered significant. That would be in relative terms to the last 5 years in which either beans or corn ended either limit up or limit down at the end of the trading day. That is the definition of a market surprise. While the March 31 Planting Intentions and Quarterly Grain Stocks reports were not surprises, they were not a yawner either.
Will acreage estimates or grain stocks estimates on Monday have a greater impact on the commodity market? Most of the market participants have anticipated increased soybean acreage and reduced corn acres, and many of the pre-report estimates have confirmed their expectations. However, the market is quite uncertain about the amount of grain stocks on hand, and in the past it has proven to be a significant market mover, whether bearish or bullish. We’ll explore the Quarterly Grain Stocks report, set for March 31 release.
Are you planning more soybean acres this year, as the market anticipates? Are you undecided? Are you staying with a normal corn and soybean rotation that is guided by agronomic issues, rather than market prices? Probably one third of those offering an answer will fall into each category. While fertility, disease, and insect pest pressures may dictate your acreage decision, those who are planting more soybeans or are undecided may need to work with the market more than usual this year. Just because current prices may favor soybeans that may not always be the case when it comes times to take it to town.