COLUMBUS — Grain farmers are facing another year of tight margins and near break-even prices — but there some major wild cards that could make 2017 different.
The biggest is the political transition, going from a Democrat to a Republican president, and one who is not afraid to “shake things up.”
The changes that the Donald Trump Administration is planning will bring opportunities and challenges for American grain farmers, said Chris Novak, CEO of the National Corn Growers Association, during his speech Dec. 20 at the Ohio Grain Farmers Symposium in Columbus.
“The regulatory pendulum is swinging back toward realizing the challenges that we’re placing on businesses,” he said.
But voters still care about clean air and water, and taking care of the environment, Novak said, and having a strong national EPA is still important.
“We need reasonable, balanced, science-based regulations, even at the same time that we’re pushing for regulatory reform,” he said.
Sharp rhetoric
Some of the things the president-elect has promised to do, like “drain the swamp” of lobbyists and career politicians, could be beneficial in some ways, and harmful in others.
Novak said the NCGA, by nature, works with lobbyists who are trying to tell politicians in Washington, about the concerns of corn growers, and the need to increase demand. Draining the swamp too much could come at a cost, Novak said.
During the campaign, Trump was adamantly opposed to trade deals like the Trans-Pacific Partnership, which economists say would be good for agriculture. But corn growers are hopeful they can work with his administration, to find an agreeable compromise.
“We know that Trump does not ‘dislike’ trade,” said Chad Kemp, president of Ohio Corn and Wheat Growers Association. “But we know that he thinks, as they stand now, some of the things aren’t written correctly.”
Commodity overview
Looking ahead, the biggest potential for profit appears to be with soybeans, followed by corn, and then wheat. But those markets will do some shifting over the next few months as planting intentions are released, and as the new Administration takes office.
During his market outlook presentation, OSU ag economist Matt Roberts said wheat is probably the least profitable of the three, with an oversupply and stagnant demand. Unless you’re growing some type of specialty wheat, or for a special market, he said demand is not in your favor.
“If we want to see (wheat) prices really recover, we have to see some sort of a supply shock and the reality is there’s not really one on the horizon,” Roberts said.
Corn acres appear more promising, according to the return-per-acre budget sheets that were released at the symposium by OSU ag economist Barry Ward.
Returns to land (gross revenue minus all costs except land cost) for Ohio corn ranges from negative $37 to $116 per acre. Estimates for “returns to total costs” for Ohio corn in 2017 are negative for all three land classes evaluated.
Supply and demand
Year-after-year increases in corn yield and production have outpaced demand.
“There either has to be a new demand source, or we will see declining production,” Roberts said.
The biggest demand seems to be with soybeans, where demand is growing for soybean oil, as well as soybean meal, which is used in livestock feed. Roberts said he thinks the competitive advantage of soybeans could cause planted acres to surpass corn acres across the nation, over the next two to three years.
Returns to land for Ohio soybeans are projected to range from $60-$230 per acre. “Returns to total costs” are projected to be negative for all three land capability classes studied. However, these figures are generally higher than corn projections.
During an industry panel discussion, Ohio corn, wheat and soybean leaders discussed their opinions on things like water quality regulations and the Renewable Fuel Standard.
Lake Erie
Tadd Nicholson, executive director of Ohio Corn and Wheat Growers Association, said the decision by Michigan to declare its portion of Lake Erie “impaired” was politically motivated.
“It’s not a plan to clean up Lake Erie, and in fact, there’s already a better plan in place right now,” he said, referring to a separate agreement between Ohio, Michigan and Ontario, Canada, to achieve the 40 percent phosphorus reduction.
Nicholson said Michigan’s decision is an invitation to the U.S. EPA, similar to what happened in the Chesapeake Bay Watershed, which resulted in more stringent restrictions on farming.
But at the same time, he said farmers need to continue to demonstrate that they can handle the situation and are making progress.
Ethanol growth
Nicholson said the Renewable Fuel Standard continues to be “extremely solid policy,” and said the volumes released by the EPA in November are “something to be celebrated.”
Soybean farmers felt the volumes could have been higher for biodiesel, but were generally happy with the increases.
In 2005, when the RFS originated, about 1.6 billion bushels of corn went into ethanol production, compared to 5.2 billion bushels today.
“It’s a great rural success story, and we were all part of that process,” said Keith Truckor, chairman of the Ohio Corn Checkoff.
The next step in increasing ethanol demand, farmers said, is increasing the availability at the pump. The Ohio Corn and Wheat Growers Association continues to work at the state and national level, to increase options for biofuel at the pump.
State commodity leaders are working directly with pump suppliers to make sure pumps are updated and installed with biofuel options, to hopefully spur more demand.
