The Farm Bill had a cakewalk through the US Senate two weeks ago. Now it is swimming in a swamp infested with crocodiles as it tries to survive in the House of Representatives. House leadership called for amendments on Monday and received over 200, many of them from out and out opponents to farm legislation. The House Rules Committee sorted out the more salient and comprehensive amendments for debate, and late Tuesday House Agriculture Committee Chairman Frank Lucas opened debate urging his House colleagues to accept the bi-partisan efforts of his committee that approved it 36 to 10. Unfortunately, that is not going to happen quickly.
The USDA’s June Supply-Demand report decreased the expected size of the 2013 corn crop, but using a reduced national yield estimate, not the expected reduction in acreage. USDA statisticians are not yet ready to quantify barren corn acres just yet, and may wait until the June 28 planted acreage report. Nevertheless, the lower production did not impress the traders and new crop corn contracts reflected the disappointment of the market.
In some parts of the Cornbelt many farmers have been dodging showers to get as many acres of corn and soybeans planted as possible, despite being beyond the final date for planting for crop insurance coverage. Late planting deducts 1% coverage per day, but there will be many farms which finished planting by the deadline to secure their full coverage. However there will be many farms which remain too wet to plant, particularly in the northern Cornbelt states which had perfect weather and great yields last year and planned to expand their corn and soybean acreage this year. As this report indicates it is not a pretty sight everywhere.
You may have eaten some of the ice cream at the Farm Progress Show, frozen with the help of a Rumely oil pull engine. While the ice cream was good, the engine is fascinating as it operates with a series of fits and starts. And the 2013 planting season has been the same way, a season of fits and starts that just could seem to get going. Just as you waited for the single cylinder engine to fire again, you have waited for the opportunity to get back in the field and plant for a day until there was an interlude of three days of rain and four days of slow drying. There may be several million acres that will go unplanted this year, but farmers will not celebrating with any Rumely ice cream.
If the commodity market is satisfied there will be more than enough corn and soybeans produced in 2013 to fulfill diminished demand, commodity prices will be significantly lower than what has been offered during years of increasing demand and finally a drought. Normal production and lower demand because of the demand destruction from the drought could easily result in prices that are 25 to 33% lower than the past year. But as crop prices fall, will crop production expenses fall along with them? Input suppliers have been raising prices in lockstep with grain prices, but will that trend continue when prices fall? How will your budget fare if costs and returns go in opposite directions?