While crop damage from an extensive Midwestern drought is still being assessed, many growers in Alabama and the Southeast are seeing the potential for above-average yields this year.
“The full extent of drought damage in the Midwestern U.S. remains to be seen, with some of the actual numbers being lower than USDA estimates,” says Max Runge, Auburn University Extension economist.
“Eighty percent of the United States is in some kind of drought, and 47 percent of the state of Alabama remains in some type of drought designation.”
But it isn’t as bad as it could be, said Runge during the recent East Alabama Crops Tour. “We’ve got some moisture out there, though for some growers it may be a little late this year. But overall, it looks pretty good.”
Alabama’s current estimate for corn yield is about 85 bushels per acre, compared with 114 bushels last year, he says. “We’ve still got a long ways to go with soybeans, and they’ll benefit from rainfall, but we’re about on track to be where we were last year with a state average of about 33 bushels per acre.”
In south Alabama, some growers were harvesting corn at the first part of August and then planting soybeans. That’s probably not a bad risk, says Runge.
Alabama’s peanut crop is looking a little better than last year, and cotton looks about the same. So Alabama’s crops don’t look too bad. Overall in the U.S., corn is expected to be down by about 13 percent from last year.”
Growers have seen record-high prices for corn and soybeans, not only record-high for this year’s crop but contract-high for next year, says Runge.
“It’s not too early for growers to be thinking about 2013. I don’t know how much higher prices might go, but it’ll be interesting to look at what these markets will do.”
There might be more upward movement in some crop prices, says Runge. “I wouldn’t be in a big rush to price anything. I’ve talked to several people over the past couple of weeks who said they booked corn at $5.50, but it doesn’t look like such a good price right now.
“Wheat was at about $8.60. Typically, the price of wheat tops out at about September, and then it moves down as we get closer to harvest, so you might want to go ahead price some of that.”
Tough marketing decisions
Even though it’s difficult to say — with soybeans over $16 and corn at more than $8 — you might want to go ahead and price some of your 2012 crop, says Runge.
“Those are good prices, so it’s hard to say. Everyone wants to get the top of the market, but that’s extremely difficult to do. Sometimes, we have to step back and look at why we got involved in agriculture in the first place. More than likely, one of the reasons wasn’t to get rich. You don’t have to always hit the top of the market.”
Late-season weather conditions remain the big question mark, he says.
“All of these yield estimates don’t really matter until we get it harvested. There have been years in the past when cotton has been ready to pick, only to get a hurricane that comes along and ruins all of that potential in the field. Soybean rust is moving in, and at current prices, you have to consider if it would pay you to spray beans this year.”
Looking ahead to 2013, seed availability will be a key, says Runge.
“A lot of the seed-producing areas have been hard hit by drought. I won’t say there will be a shortage, but there won’t be an abundance of seed next spring. With current corn prices, there will be competition next year for acres and seed, and there will be new corn acres in addition to what we already have this year.”
There are reports from the Midwest that some fertilizer prices are actually easing down because some of the farmers there are having cash-flow problem, says Runge.
“An exception to that would be anhydrous ammonia. Diesel fuel prices typically are highest in the fall. Some of the speculation I’ve seen about the price of oil is that it won’t budge up much higher, but it is an unknown, so I don’t think it’ll be any much cheaper.
“If you’ve got room to store it, you might want to lock in some diesel fuel. Interest rates are still low, although they’re showing some signs of bumping up just a little bit. It may be a good time to look at some investments, such as putting in irrigation or adding some precision ag technology to your operation, maybe even some storage.”
Beef is probably about as cheap right now as it’ll be for awhile, says Runge. Livestock or anything else that consumes feed is going to be higher next year, and food prices are expected to increase 3 to 5 percent.
“To make things even more interesting, there’s an election coming up in November, and we’ve got a farm bill sitting out there. We don’t know what’ll happen with either one of those, but rest assured it’ll have some effect on agriculture.
“So be in as good a position as you can, and make the best decisions you can. You don’t have to be at the top of the market, but you do want to take advantage of some of these prices.”