Farm Progress

Economist: Hold off on crop decisions

January 14, 2009

3 Min Read

Like countless other parents, economist Bob Goodman recently was presented with a challenge: Helping his daughter get a handle on the size of the recent $700 billion federal bailout.

He decided to get creative.

“I did a few calculations and it turns out that if you lay 700-billion dollar bills edge to edge on the ground, they would form a 420-foot-wide belt stretching across the earth,” says Goodman, an Alabama Cooperative Extension System economist and Auburn University professor of agricultural economics.

It's a staggering sum of money — for most people, an unfathomable sum — and partly the basis for why so many Americans are expressing so much uncertainty about the future. And adding to all of this uncertainty is the perennial question: Will it work?

Goodman is no stranger to economic uncertainty. For more than two decades, he has helped farmers cope with economic uncertainty.

But even he is surprised at the level of uncertainty expressed recently.

Among the rising tides of uncertainty swirling through the U.S. economy, some of the deepest are washing across through the U.S. farming sector — a reality that Goodman, a former row-crop farmer, has seen first-hand talking with producers across the state.

And within this sector, no one is expressing greater uncertainty than U.S. cotton farmers, who watched December cotton futures fall below 40 cents recently.

The Montgomery Advertiser newspaper followed with more bad news, reporting that the 130-year-old firm Weil Brothers cotton brokerage firm was going out of business as a result of the acute market downturn.

“It's a sign of the times, and times are very tough in the farming business,” Goodman says.

So what advice does he offer producers in these gloomy times? Advice similar to what Churchill offered his fellow Britons during the darkest days of the Second World War: Hang tough, it's possible the worst has passed.

“I'm not a technician, but I hope experts in that art would identify the pattern at the tail-end of the chart as a major bottom,” says Goodman, who still holds out hope that these possibly bottomed-out prices will strengthen through the winter and that by spring “there will be a clear signal about what we should plant. It all depends on demand at this point.”

In the midst of all this economic turmoil and uncertainty, using a market delay strategy with the hope of holding out for a better price is too risky, Goodman says.

“The current December 2009 contract is under 55 cents, which is about half the cost of production,” he says. “At the current futures levels, you might not even be able to cover your fertilizer costs.”

And while gas prices have plummeted to under $2 a gallon in recent weeks, diesel prices are still running a dollar higher.

For those who intend to follow Goodman's advice, hanging tight and continuing to farm despite all the turmoil, he advises giving some consideration to soybeans — maybe even buying the seed and diesel on credit and not using any fertilizer.

Pointing to another bright spot on an otherwise gray horizon, Goodman says that in strictly agronomic terms, all Alabama row crops fared exceedingly well in 2008.

Cotton variety trial plantings on several farms turned up two-bale yields, says Goodman, who cited a variety trial at the Phillip Barber farm in Harpersville for turning out an especially noteworthy crop.

“There were lots of open, fluffy bolls right up to the top of the plant due to late-season weather and the field looked great, posting two-bale yields,” he says.

Goodman says the results of these trials will be posted to the Extension agronomic team Web site: www.alabamacrops.com.

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