FOOD & FUEL FILE
As corn and soybeans cash prices flutter around their post-harvest highs, a farmer telephones with a question: How do February’s stronger prices compare to 2010 season average prices for corn, soybeans, wheat and cotton?
Well, let’s see. According to U.S. Department of Agriculture data, the national average cash price for 2010 corn was $6.38 per bushel, soybeans averaged $12.97, Kansas City wheat clocked in at $7.55 and cotton at a plump $1.40 per hundredweight.
Not surprisingly, 2010 average futures prices were stronger, according to numbers compiled by Bloomberg News. Chicago corn, for example, averaged $6.79/bushel in 2010, “the highest ever and twice the level of the previous decade.” Whoa.
Likewise, the news service continues, soybeans averaged “a record $13.21, 72 percent above the 10 previous years, while wheat’s average of $7.24 was the second-highest ever and 57 percent more than the past decade.”
We like those numbers for no other reason than if 2010 prices are, as some suggest, the “new normal,” there’s everything new and nothing normal about any of ’em.
Moreover, alone or as a group, they make an interesting yardstick to measure today’s prices which, for corn and soybeans – $6.20 or so and $12.50 in central Illinois – aren’t too shabby by comparison.
These tall numbers draw us to another set of even taller numbers: anticipated 2012 planted acreage.
Since the definitive acre counter, USDA, will not make public its Prospective Plantings report until March 30, numbers in today’s market are best guesses from non-government sources. Most, however, see corn acres soaring, bean acres stable and wheat regaining acres lost to conservation.
For example, one early February poll estimated 2012 corn acres at 94.3 million, the most since 1944, beans at 75.3 million and wheat at 57.2 million. The total for the three, according to this firm, is a staggering 226.8 million, the most since 1984.
Total production – given good weather – would be equally staggering: nearly 14 billion bushels for corn, 3.3 bb for beans and 2 billion-plus for wheat.
The increased 2012 acres are coming from two chief sources, those not planted, washed out or fried by last year’s rains, floods and droughts; and long-fallow, now-getting-planted Conservation Reserve Program acres.
While you can’t change the weather, Congress changed the CRP in the about-to-expire 2008 Farm Bill. Those changes and today’s sky-high grain prices have drawn nearly 5 million acres from the program in the last three years.
An even bigger amount comes this fall when contracts on a whopping 6.5 million CRP acres expire.
How many will not renew? Hard to say, but as DTN reported in January, nearly 75 percent of those expiring acres, or 4.85 million, are in “states (that) suffered major federal disaster declarations in 2011.”
Starting to figure out why most commodity groups are pushing to expand today’s already generous federal crop insurance programs to cover nearly every production and market risk – and maybe the farm’s lilac bush – in the 2012 farm bill?
On the crop insurance front, here’s two more numbers that reveal its large presence in today’s federal farm policy.
First, despite 2011 crop and livestock sales that totaled $363 billion, a record, and net farm income of $99.1 billion, another record, crop insurers paid at least $9.1 billion in claims, itself a record.
Second, according to February estimates released by the Congressional Budget Office, the cumulative cost of federal crop insurance is forecast to be $89 billion over the next 10 years. That’s one-third more than the $65 billion CBO reckons all USDA conservation programs will cost over the same period.
The White House has its own number for federal crop insurance; it suggests the heavily subsidized program be given a $7.6 billion haircut over the coming decade.
We’d give you hard numbers on the long odds of that happening, but it’s just easier to say that pigs will fly first.
The Farm and Food File is published weekly in more than 70 newspapers in North America. Contact Alan Guebert at www.farmandfoodfile.com.
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