Scott Stiles, Extension economist and instructor at the University of Arkansas System Division of Agriculture, answered questions pertaining to market disruptions due to effects from COVID-19 as well as weather conditions.
What is the estimated acreage to be planted for each of the row crops listed: rice, corn, soybeans, and cotton? How does that compare with last year and the five-year average?
"Since 2020 planting is just getting under way in the state of Arkansas, it is hard to say what the estimated acreage will be. As of Sunday, the first week of April, we were 3% planted on corn and 1% on rice. A small number of soybeans were planted but not enough to register. Due to above normal rain, planting is lagging the five-year average pace."
What do the markets look like now for rice, corn, soybeans, and cotton?
"In a recent UA article titled 'COVID-19’s impact on Arkansas economy includes ag labor, supply chain disruptions,' we provided some insight on key market drivers for each of the major commodities. Where prices go from here are contingent on how quickly the world finds a medical solution to COVID-19. 2020 growing season weather is also a key factor.
"At the present time, we must rely heavily on futures prices for an indication of true value. Given that, futures prices are telling our producers to increase rice acreage. In USDA's Prospective Plantings report, NASS did indicate Arkansas is expected to see a modest increase in corn acreage as well as soybeans. Prices are not very attractive for either of those (corn or soybeans). In comparison to cotton, soybeans offer a lower cost of production and less intensive management and perhaps that is where the additional soybean acres come from. As for cotton, growers look to the December futures contract, and it currently trades at 54 cents. On a typical 25% share rent situation, cotton prices need to be at 70 cents to at least cover total costs per acre. That easily explains the projected 30,000-acre year-to-year decline in cotton."
What production and/or market strategies would you recommend to reduce risk going into the season?
"As for marketing strategies, we strongly encourage producers each year to explore revenue protection insurance policies as well as forward pricing and/or hedging. We have a user-friendly set of Excel enterprise budgets that allows growers to determine their cost of production and break-even prices. We believe that is the foundation of a solid and hopefully profitable marketing strategy."
What do budgets show as breakeven yields and market prices?
"To your question about breakeven yields, we have too many land lease arrangements to give a blanket answer. Around the state we have 20%, 25%, 30%, 33% and 50% share leases and a ton of different cash rents. With that being said, making a planting decision is an individual decision based on land rents, market prices, basis at local elevators, yields, gin rebates, etc. There is an endless number of variables unique to each operation."