There was one big advantage that corn producers had over cotton producers in the Mid-South this year. They harvested a bumper crop while cotton producers didn't.
“Corn yields have been good, and we've been able to get it out of the field,” said Steve Martin, Extension economist at the Delta Research and Extension Center at Stoneville, Miss., when asked what may prompt more corn acreage next year.
According to Martin, more corn in the mix is a good way to spread some weather risk, build organic matter and bump cotton yields. Martin's research at Stoneville has shown that corn at the loan rate will pay off for producers. With corn prices even higher than the loan rate now, “corn and cotton is a real good rotation.”
Martin also pointed out that for the first time in a few years, the commodity markets are starting to act like markets, and producers want to respond. “The bottom line is that no matter what anti-agricultural entities may say, the farmer would prefer to get his income out of the market. That's why the planting flexibility has stayed in these farm bills, so the farmer can respond to market incentives.”
USDA is not projecting a counter-cyclical payment on soybeans, corn and wheat, “suggesting that those crop prices will be above the loan,” Martin said.
Specifically, a target price for corn at $2.60 minus a 28-cent direct payment infers that prices for corn will be above $2.32. A target price for wheat of $3.86 minus a direct payment of 52 cents infers that prices for wheat will be above $3.34. The target price for soybeans is $5.80 minus a direct payment of 44 cents infers a soybean price of $5.36 or better.
Meanwhile, USDA has approved the full 35 percent counter-cyclical payment on cotton and rice which gives some indication that the agency does not think that those two crops will be above the loan rate. Of course, you can follow futures prices on the exchanges as well.
Cotton producers can expect a 15 percent increase in cotton yields following corn, noted Martin. On the downside, there is a lot more risk associated with drought stress in corn than there is with other crops. So put corn on irrigated ground.
Martin noted that wheat prices are also headed up, but the wet fall has delayed some harvesting on many fields which in turn could be planted back to wheat.
“Wheat prices are so high,” Martin said. “And producers are looking at planting it on soybean-type land that doesn't have irrigation. Wheat is a good looking crop from an economic perspective.”