“I must admit, of all the good things we do in U.S. agriculture, corn is what we do best. We dominate world production,” says Bell, who spoke to a packed house Mar. 1 at the annual Mid-South Farm and Gin Show.
About five or six years ago, there was a move of corn outside traditional Corn Belt borders. Shortly thereafter, aflatoxin hit the Delta corn crop.
“We almost wore the roads out with farmers running around trying to find someone to take their corn. (Aflatoxin) is still a risk, and I remind you of that.
“I get questions about ethanol and Riceland (which is located in Stuttgart, Ark.) building an ethanol plant. That way if aflatoxin shows up, we can make ethanol out of affected corn. I must admit we’ve been looking at that although we’ve had more focus on bio-diesel, which we see as a better alternative.”
There are some advantages to growing corn in the South, says Bell. Harvest comes off before corn in the Corn Belt, and there should also be a premium basis right at harvest time, he says. A couple of years ago, farmers “really scored” by taking advantage of that.
“For those with storage – corn is a Northern Hemisphere crop which means 90 percent or more is grown in the northern hemisphere – there’s a basis appreciation through March. But you can only take advantage of that if you have adequate storage.”
As far as prospects for corn, Bell expects acreage to be up.
“I think if we have a normal crop – 9.9 billion bushels, which is up from 9.5 billion this past year – and do a fairly good job of marketing, we’ll be OK. The export numbers have been good, as have the ethanol use. I believe we’ll have a decline in stocks and that will be good.
“If we have a crop that’s 10 billion-plus bushels, the price will likely go below $2. That’s less than the national average this year of $2.15. If we have a poor crop – maybe 8.8 billion bushels – most forecasts have prices at $2.50 per bushel. Some people have predicted $3, although I’m not willing to go that far yet.”
Bell urges farmers to know where they’ll market their milo before they undertake growing the crop. If you think you’ll sell it to the poultry firms, you’d better make sure the firms will take it come harvest.
“The buyers may say they’ll buy your milo, but the nutritionists are the ones to be concerned about. The nutritionists run the poultry firms, and if they’re using corn on a certain group of birds they aren’t going to switch to milo. You need to make sure you have a place to go with milo.”
Wheat has been Bell’s favorite commodity this past year.
“I keep saying that when we find our way out of this low-price morass, wheat will lead the way. I don’t know how many noticed it, but for months we didn’t have an LDP on wheat. For the 2001-02 year, our pool at Riceland will pay $3 per bushel compared to the loan rate of $2.65.”
Wheat is a good third crop in the Mid-South, says Bell. Breeders have made great strides in variety improvement over the last several years. That’s helped make wheat a mainstay as a third crop.
It appears the current crop is doing well. However, prices for the 2002-03 year aren’t looking as good as they were a year ago, says Bell.
“The Europeans appear to have planted more wheat acres and in all likelihood they’ll be a much stronger competitor.”
In contrast to corn and wheat, soybeans are a Southern Hemisphere crop. That means there’s “not a very adequate carry in the futures market and it has a limited basis appreciation. Marketing opportunities are much more restricted. As far as I’m concerned, with the LDP programs it’s had in the last several years, it’s very difficult to do a good marketing job.”
Before the LDP days, Bell says a lot of farmers in the Mid-South did well by booking soybeans ahead and selling the balance at harvest. But that hasn’t worked well with the LDP in place.
It appears that the South American crop being harvested is a big one. In the case of Brazil, it appears the crop may be record, says Bell. Argentina, the other major producer in South America, is a bit more uncertain. They have some dry areas in the country and some major financial problems.
“I think the amazing thing about soybeans is the demand base that we’ve been building on a worldwide basis. The consumption of soybeans is going to continue to increase for at least the next five or six years. A lot of that is due to China. The Chinese have been a lot of soybean products from us and recently entered the World Trade Organization (WTO). We thought we’d get some positive benefits from their inclusion, but that’s been offset somewhat by their attitude toward GMO crops.”
As far as the 2002 soybean acreage, Bell thinks it will be down or remain the same. With a normal crop yield, “we’ll probably end up with a 2.9 billion bushel crop. I think that we’ll continue a good domestic crush. What’s important, though, are continued exports of meal and oil.”
If the crop is normal, Bell thinks farmers will see stocks decline.
“That said, I don’t see us getting out of the $4.25 or $4.30 per bushel price range. That means a $1 to $1.25 LDP mainly because we don’t seem to be able to break the momentum of near record crops in both the U.S. and South America. If we have excellent weather and get above a 3 billion bushel crop, we could see prices below $4.”
One other factor to consider is the El Nino, which appears to be developing as water temperatures in the Pacific Ocean are rising. Such upward temperature movements usually lead to the El Nino phenomena. If the warmer temperatures do birth El Nino, it could cause trouble for the U.S. and South American crops. But the effect is usually first seen in Southeast Asia, a big rice growing area.
“I think even if we have a poor crop this year, we don’t have much prospect of getting $6. I’d peg the top at about $5.50,” says Bell.
Last year, there was a record rice crop in the U.S. – up 12 percent over the previous year. The long grain crop was up 28 percent and medium grain was down 23 percent. Most of the record was due to yield per acre. Farmers had excellent weather conditions, excellent yields.
Of course when you have such a big crop, what determines price is “what the projected carry out stocks will be the following summer. When you look at that, everyone is showing big increases in stock carryout for 2002.”
As a result, the lowest cash prices in 15 years have been seen. And the country isn’t doing a good job of making that crop disappear.
“If you look back to mid-February and count milling, exports and sales of rough rice, we’re running about 4 percent behind a year ago with a 24 percent bigger crop. We have a lot of unsold U.S. rice in bins.”
But domestic demand continues to grow. At Riceland, “we’re continuing to focus on the domestic market. About 75 percent of everything we sell goes into the domestic market. One area that we’re lagging behind is in milled rice exports. We’re working on that.
“In terms of acreage, I think we’ll have about the same acreage in the Mid-South that we had a year ago. Prices are low, but we have a good safety net in terms of the loan rate. I think farmers and bankers believe rice is still the best alternative.”
With regards to Cuba, while U.S. sanctions are still in place, the work Bell and colleagues have put in over the last couple of years is finally producing sales.
“The rice we sold Cuba in November just arrived because we shipped it to fit their needs. The quality was well received. They asked for number 5 grade and that’s what we sent. But a U.S. 5 grade looks like a 1-plus compared to the rice they normally get from southeast Asia.
“The industry has sold Cuba 35,000 tons. Most of that has been shipped and I think there’s potential for more sales. I expect there will be more sales in the next several weeks and we have a chance of doubling the amount already sold. This is a beginning.”