October 31, 2018
  • Market Facilitation Payments Program a Go for December
  • How will the 2019 Acreage Mix Change
  • Unwinding New Era Crop Acreage and Prices

Register for the Farm Assets Conference today. The cost is just $40 and includes the price of parking and your noon meal. Come to learn more about how large corporations like Anheuser Busch and McDonald’s are reaching all the way through the supply chain to tap farmers on the shoulder looking for production practices and seed characteristics which meet their needs. It is likely to change how commodity crops are marketed over the next decade. The CME Group, ADM, Cargill, Bunge, and Louis Dreyfus are already preparing for this eventuality. However, might it be possible the middleman in the system will become a distribution system rather than the marketing arm? We’ll explore these concepts during the 2018 Farm Assets Conference.

Register Online today or by calling 800–898–1065

Click here to see the full agenda or scroll to the bottom of this letter. The conference will be held Tuesday, November 20th in Normal, Illinois.

Market Facilitation Payments Program a Go for December

During a Champaign County, Illinois listening session U.S. Secretary of Agriculture Sonny Perdue confirmed the second round of Market Facilitation Program payments for farmers will be coming in December.

U.S. Secretary of Agriculture Sonny Perdue last week told farmers at an event in Champaign County, Illinois that it was likely the second round of MFP payments would come in December. USDA confirmed that in a press release Monday. USDA says those payments are expected, but not yet fully confirmed, to fill out the full amount off compensation producers will receive for markets lost to China as a result of the Trump Administration’s trade battle. This would push the soybean payment to $1.65 per bushel and the corn payment to $0.01. Half of that amount for each commodity has already been approved and distributed (if actual 2019 production numbers have been turned into FSA).

Secretary Perdue says his agency unsuccessfully looked for ways to vary the payments from region to region across the nation based on the impact of Chinese imposed tariffs. There had been some speculation, for instance, farmers in the Dakota’s might end up with bigger payments because soybean exports out the PNW to China have stopped.

The Secretary also made it very clear farmers should not expect another Market Facilitation Program next year. He says this season the trade battle was imposed on them after their planting decisions had been made and so Washington felt obligated to set that right. There will be no such obligation for the 2019 growing season. He puts it in trade terms saying the United States became too dependent on China as a soybean market and that it must “diversify”.

Consequently, U.S. farmers will need to diversify their operations and crop acreage mixes in order to avoid the market disruptions caused by the rebalancing of trade.

How will the 2019 Acreage Mix Change

Those decisions to diversify are driven largely by price and crop rotation. University of Illinois Agricultural Economist Todd Hubbs has done some calculations as it relates to corn and soybeans. He expects, based on price today, U.S. farmers will plant 91.1 million acres of corn in 2019 and 85.7 million acres of soybeans.

Here’s how Todd Hubbs sees that playing out across the nation for corn, soybeans, cotton, and wheat, “We are going to see some wheat acreage expansion. Particularly spring wheat because those prices are relatively strong. Maybe some cotton acreage expansion. We aren’t talking tens-of-millions of acres. Some of the small grains might also see some expansion. So places in the south and the western corn belt may shift back to their more traditional crops.”

Hubbs’ calls this an unwinding of the “new era” crop acreage. His forecast, like USDA’s 2019 planting season advice, does not include a resumption of trade with China.

Since the middle of the last decade agricultural economist, farmers, and policy makers have talked about a new era of agricultural prices at a higher plateau. That era may or may not be coming to an end.

Unwinding New Era Crop Acreage and Prices

The last ten years have seen the build out of the ethanol infrastructure in the United States and the push for red meat production in China. The first caused U.S. farmers to raise more corn to grind for ethanol. The second pushed the expansion of soybean acreage to feed hogs in China. Both drove prices higher and caused acreage to change here and around the planet. That era may coming to an end says University of Illinois Agricultural Economist Todd Hubbs, “I mean we talk about the new era prices. It lead to a new era of acreage allotments. I think we may be at the start of unwinding this build of corn and soybean acreage.”

There are two reasons for the unwinding.

First, the federal legislation which drove the increase in corn acreage has capped out. It actually did that in 2015. Now the Trump Administration is calling to open up the whole gasoline supply to 15% ethanol blends rather than 10%. Because the infrastructure is not in place for that to happen and seems highly unlikely to be built out by a resistant oil industry, it won’t move the dial on corn usage enough to really matter say the ag economists at Illinois. Driving the price of corn higher based on new domestic ethanol demand is probably over.

Second is the trade war with China. This one nation had consumed more than 30% of the U.S. soybean crop. It has essentially shut that gate in a struggle with the United States to determine which nation is likely to be the world’s number one economic superpower in the future. China wants to do it with a combination of capitalism and a planned economy under Communism. The United States uses Democracy and capitalism. The distinction is important because it may give China the upper hand in the short-run. It can simply choose without political ramifications how to organize resources. Those choices are right now reallocating acreage in the United States because farmers are making next year’s cropping decisions today. It’s exactly what the U.S. Secretary of Agriculture last week said they should do, “So the market will equilibrate over a period of time and farmers will look at the market and make their marketing and planting decisions the way they always do.”

What farmers do is to make their planting decisions based on crop rotation needs and price. The price of soybeans won’t be high on that list for next year says Hubbs, “It really does change the allotment. What do we rotate with? If we keep expanding corn acreage and continue to see these unbelievable yields across the country. We may have knocked ourselves out of prices in that new era. Or at least we are going to be pegged in the low end of the range of that new era of prices for the foreseeable future.”

Sponsor the Farm Assets Conference

There are several ways to sponsor the 2018 Farm Assets Conference. Booth spaces are available as are reserved tables. Check out the complete details here or contact Jill Clements at Illinois Public Media (217) 333–7300.

2018 Farm Assets Conference

call 1–800–898–1065 or online at BUY TICKETS NOW | $40 each

Marriott Hotel and Conference Center
201 Broadway Avenue
Normal, Illinois 61761

The noon meal is included. Parking is free in the deck next to the Marriott. There are a large number of vendors available for you to talk with prior to and during the breaks. Come and check out the whole of the event.

8:00 am | Illinois Corn Growers Association Annual Meeting

9:30 am | Farm Assets Registration Desk Opens

10:30am | The Supply Chain Wants You - premiums & contracts
- Angie Slaughter, Vice President Procurement - Anheuser-Busch InBev
- Rickette Collins, Sr. Director Global Supply Chain - McDonald’s Corporation
- Ken Dallmier, President and COO - Clarkson Grain Company
- Brad Allen, AgriEdge Specialist - Syngenta

Noon | Lunch

1:00pm | Agriculture at Research Park
- Laura Weisskopf Bleill, Associate Director, University of Illinois Research Park

1:15pm | Trade, Tariffs, Grain Flow and the Farm Economy
- Gary Schnitkey, University of Illinois
- Jonathan Coppess, University of Illinois
- Bruce Sherrick, ILLINOIS TIAA Center for Farmland Research

2:15pm | Break

2:30pm | WILLAg Commodity Marketing Panel
- Pete Manhart, Bates Commodities
- Bill Mayer, Strategic Farm Marketing
- Merrill Crowley, Midwest Market Solutions
- Wayne Nelson, L and M Commodities
- Todd Hubbs, University of Illinois

Media Registration | Members of the press should contact Lindsay Mitchell (309) 557–3257 at the Illinois Corn Growers Association to register for the Farm Assets Conference.