🌽 Puzzling Planting Data / ⛽️ Biofuels Have Hope / 🔬 Ag Research Lag

Wednesday’s release of the USDA’s Prospective Plantings report left many in the ag industry with a furrowed brow.

Backstory

Each March, the USDA sends out surveys to 80,000 farmers with the hope to better understand their planting intentions for the upcoming growing season. And most years, the big reveal is preceded by lots of hype, speculation, and uncertainty.

And farm economists have historical trust issues with the USDA’s data.

Lagging data often leads to revised reports months down the road. Last year even saw the final corn acreage tally 6.2 million acres below the March estimate. Woof.

But analysts still placed their bets. Between high grain prices, amped-up Chinese demand, and a slow South American growing season, most industry experts pegged farmers to be seeding corn and soybeans 'fencepost to fencepost.'

Nowstory

Let’s just say the markets were caught a little off guard…

The surveys showed:

Corn acreage expectations at 91.1 million, when the trade was anticipating 93.1 million.
Soybean planting prospects at 87.6 million acres, a far cry from the 90 million expected.

The aftermath: Corn and soy prices went bonkers, both reaching their upper limit in trading for the day.

So, what’s mysteriously missing? About 3 million acres, noted University of Missouri economist Ben Brown. With steady acreage expectations for cotton and wheat, he’s intrigued where that cropland has gone in the estimates.

Looking ahead: Warm temperatures could make for a favorable and fast kickoff to corn planting. Add in the bookoo bucks on the table with current grain price levels, and growers might take the bait, adding in more acres to cash in.

→ GMO feed is fiiine. Ag Secretary Tom Vilsack confirmed that Mexico’s plans to phase out GMO corn imports by 2023 do not include corn used for animal feed.

→ Set the pork parking brake. A federal court invalidated a 2019 Trump-era ruling that allowed pork plants to run processing lines with no speed limits.

→ Barley never dies. Anheuser-Busch will build a $100 million plant on its St. Louis campus for Evergrain, its startup that recycles barley waste from brewing into protein and fiber supplements.

→ DFA doin' just fine. Dairy Farmers of America announced 2020 net income at $170.6 million, up from 2019’s $83.2 million, while noting they produced 63.2 billion pounds of milk, about 28% of total U.S. milk produced.

→ RFID goes optional. The USDA confirmed that RFID tags will not be required for cattle crossing state lines after producer representatives noted the substantial production costs needed to be compliant.

→ Produce powerhouse. The Produce Marketing Association and United Fresh are merging forces to create a new global trade association that will level up member services, education programs, and advocacy efforts.

→ Sticker shock for poultry producers. Rabobank’s Q2 outlook for the global industry includes coaching companies to manage volatile, pricey feed inputs [60-70% of all costs] and gear up for increased foodservice demand.

Soybean oil demand is skyrocketing, and bean processors are pulling out their “Go Green” stickers and gearing up for what they believe will be a biodiesel boom.

Refresher: The Renewable Fuel Standard (RFS) is scheduled to reset in 2022, and the EPA has the authority to set required biofuel volumes. With an expected “green agenda” push by the Biden Administration, Cargill is ratcheting up their processing capacity: taking money from the bank and putting it in the (biodiesel) tank.

By the numbers:

25%: Approximate increase in soybean oil futures already this year.
$475 million: Cargill’s five-year investment in processing plants across seven states.
100%: Planned increase in soybean crushing capacity at Cargill’s Sidney, OH plant

And it’s not just Cargill who’s rolling up their sleeves. ADM has announced processing efficiency improvements, and Bunge - the world’s #1 oilseeds processor - is planning to invest in refinery efficiency and tank-storage capacity.

Oh, and this… Soy producers and processors aren’t the only ones with skin in the game. The corn industry is promoting more than just kernels of truth about ethanol as the EPA starts shelling out its plans for the RFS. All this in an effort to remind EPA Administrator Mike Regan that ethanol has 40%-50% lower greenhouse gas emissions than gasoline.

Bottom line: Rising future demand should bode well for producers. Zippy Duvall, American Farm Bureau President, made his case when he noted, “Homegrown, renewable fuel has been an American success story, and expanding to more international markets can make it a global success story.”

In case you’ve been living under a rock, you’ve probably noticed that ag industry dynamics are constantly changing.

Commodity prices catapult, then plunge. Supply chains get stretched thanks to Mother Nature’s reckoning. Technology dumps new tools and processes constantly.

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Managing business finances

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Money can’t buy you love, but it can buy you a stronger agricultural system, and that’s basically the same thing.

Two studies, one by The Breakthrough Institute and one by the Farm Journal Foundation and American Farm Bureau Federation (AFBF), are speaking the same language: $$$ talks, especially when it comes to publicly funded research and development (R&D) for agriculture.

It takes two to make it rain: Both private and public investments are critical in the food system. And in the AFBF study, it was noted that U.S. private agricultural R&D funding appears to be increasing while U.S. public funding needs a raise. For example, USDA agricultural agency budgets have been relatively flat at around $4.2 billion in 2020 compared with $4.1 billion in 2010.

Money is the root: Not of all evil, but of great advancements in agriculture. With the world population expected to reach 10 billion by 2050, food production will need to outkick its coverage. More dollars of public funding R&D would help in a lot of ways.

Some examples of what pumped up funding could do:

Reduce greenhouse gas emissions by more than 100 million tons — or one-sixth of agriculture’s current total emissions.
Lower global food prices by 8%.
Improve supply chain resilience (ahem, COVID-19).