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Harvest capacity may affect Mid-South farmers’ decision on cotton acreage for 2019.

Cotton and corn over beans, but watch costs

West spring conditions may boost cotton acreage

West Tennessee and many other Mid-South farmers will take a hard look at cotton this spring, maybe add corn, depending on planting conditions, but likely will cut back on soybeans, says a University of Tennessee Institute of Agriculture Extension economist.

Check Danehower, a farm management specialist in Lauderdale County, Tenn., expects to see some farmers get back into cotton this year and a few who will plant it for the first time.

“I’ve seen a lot of interest in cotton early on,” Danehower says. “Of course, prices were a nickel higher in late December and early January. We’ve come off that a bit, which may have taken away some interest in cotton, especially for those who have not been in cotton in the last few years.”

It may come down to more than markets, he says. Harvest capacity will play a role. “Do they own pickers, or do they buy one or do they custom harvest?”

Farmers who have been in cotton likely will maintain or add acreage, Danehower says. “So, we will expect to see a little more cotton; it looks as good as anything. But the ones not in cotton for the last couple of years will look at it harder now. Beans or corn look about as good.”

The edge likely will go to corn if farmers can get it planted.

“Tennessee corn farmers have produced really good yields the last two years,” Danehower says. “At current price levels, if we can plug in good yields, which have averaged 164 bushels over the last five years, corn looks as good as anything.”

He says soybeans also look positive but the breakeven price hangs at about $9. He’s not certain soybeans can maintain that price, even if the current trade standoff ends soon.

Soybean issues

“Soybeans are hovering around the $9 range but with a huge supply of ending stocks. Will it hold if the trade issue is resolved? I think trade and surplus stocks will hang over the market and limit any upside in soybeans. It will take a weather event in some soybean growing region of the world — the U.S. or South America — to see huge bump in bean prices.”

Upside for cotton

Another positive for cotton, Danehower says, is passage of a new farm bill that includes cottonseed. “We hope to see advantages this year from the farm bill seed cotton program. Payments will be made in the fall for last year’s crop, 2018. That will help cash flow.”

He says the market facilitation payments approved last year “kept some producers in the black. Without it, they would be in a bad situation. But producers also did an excellent job of marketing. If they did that and received payments, it helped a lot.

“We are just now getting into the new farm bill and seeing what it will offer,” Danehower adds. “With implementation, I think, it will be positive. But implementation has been slow.”

Early frustration

From early in the planning stage for this year’s crop mix, producers, consultants and farm supplier have been frustrated, Danehower says.

“Nothing is sticking up to say this is the crop to plant. Most years are like that. But in some years, one crop will stand out, not this year.

“Suppliers say farmers have been slow to place orders for seed. They are still wondering: What kind of seed, cotton, corn or beans? It’s frustrating for suppliers. They like to get their lines set by Christmas. We still had crops in the field this past Christmas. We also see a lot of worry and stress.”

Average not good enough

Regardless of the crop mix, Danehower warns that average yields will not be adequate to break out of the red this year. “Stay with the basics,” he says, “fertility, weed management, and insect control; select a variety for the productivity of the ground. Farmers must stay on those basics.”

He cautions producers to mind basics but not to go overboard with costs.

“They definitely have to manage costs. Our farmers have been doing a good job managing costs the last couple of years. They must be mindful of fertility but not over fertilize. If they have good fertility levels, they may cut back and still produce a good crop. But don’t skimp on needed nutrients, including lime. Adequate nutrition is essential to keep sustainable yields.”

Mind the weeds

Weed control will be critical. “If farmers can stay on top of weed control, manage costs and keep things manageable by being timely, they can contain costs and maintain productivity.

“The same goes with insect control. Most farmers are scouting and trying to apply the correct chemicals — insecticides, herbicides and others — as needed.

Still, they always have issues with weather not cooperating on applications.”

Other costs

Danehower says Mid-South farmers “have gone heavily into technology with transgenic crops, including dicamba-tolerant varieties. They are using quite a bit of that and have undergone additional training across most Mid-South states.

“We are taking advantage of this technology, which has been very useful. The key going forward is to rotate chemistry, so we don’t develop resistance to new technology.”

He says equipment costs may pose big financial burdens if not managed. “We have to watch equipment costs to keep them from getting out of hand. For several years, producers have deferred equipment purchases, hoping next year will be better. Some had to replace older equipment last year, either through trade, purchase or attractive leases, to get them through the year.

“Overall, producers have done a good job managing equipment costs. They must continue, but it’s an area to watch.”

He says some famers may fall into a favorable tax law trap, tax options favorable for writing off equipment costs.

“But they must make sure they also have an economic justification to replace equipment, not just income tax benefits.”

Replacing equipment to improve production and efficiency and to avoid down time may be reasonable. Also, taking advantage of new technology to improve efficiency may make sense.

Marketing

Marketing expertise will pay dividends with the 2019 crop, Danehower says.

“Producers must do a good job of marketing and take advantage of price rallies when they see them. Recognize those opportunities. It’s often hard to know if it’s time to pull the trigger. So, producers must know what pricing level they need to maintain cost control.”

He suggests farmers watch for price rallies to market over multiple years. Additional use of any of the major crops, he says, will boost prices.

“In 2006 or 2007, the ethanol market pulled acreage from beans to corn and pulled bean prices up. We always see opportunities throughout the marketing year. Be willing and able to pull the trigger and take advantage of those opportunities.”

Weather delays

Danehower says rainfall and flooding continue to delay field work across the Delta. “We usually see water receded by now, with farmers able to get field work done in bottom land in anticipation of planting soybeans. A lot of that acreage is still too wet to work.

“Also, don’t plan on cotton or corn in areas prone to flood. It probably will be April before rivers recede and farmers are able to start thinking about planting a soybean crop.”

Every planting season is different, Danehower says. “I try to get a feel from producers on what they want to do.” That’s been a bit different this year with marginal commodity prices, uncertain planting conditions and high production costs.

“Farming isn’t simple,” he says. “At various points in my career I’ve seen a few prognosticators take advantage of markets and some get rich with prices taking off. But no one can just jump in and be a farmer.”

The flip side of high markets, he adds, is that production costs go up, too, “just under the gross income, so margins stay about the same. We’ve had a few years of good profit margins and some producers built capital reserves. A lot of them spent a lot of that the last few years to maintain farms.”

Danehower expects farmers to be frugal this year but not miserly to the point of sacrificing profit potential.

“I’ve never seen producers willing to throw money out without needing to.”

TAGS: Corn Soybean
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