I see at minimum -10 million unplanted corn acres and perhaps much more. I also have a very hard time fully grasping potential yield loss on all of the re-plant and late-planted acres. Recently on the June WASDE, the U.S. planted acreage estimate was lowered by -3 million to 89.8 million. The U.S. average yield estimate was more dramatically reduced, lowered by -10 bushels per acre from 176 down to 166 per acre. Total U.S. production is lowered from 15.030 billion bushels down to 13.680 billion. Let’s keep in mind, “harvested acres” were only dropped from 85.4 million down to 82.4 million. Bulls are thinking harvested acres could eventually fall to between 70 and 75 million. If that were to play itself out, total U.S. crop production would probably drop to between 11.5 to 12.5 billion bushels. How high would prices push and what type of demand destruction would occur is anyone’s guess?
There seems to be a large disconnect between best-of-business practices and the farmers unrelent desire to get out in the fields to plant. In other words, despite all logic and business acumen, many producers are still opting to plant corn rather than take the much more obvious preventive plant payment. For some I talk to its about pride, tradition or simply the fact planting and trying to grow a crop is all they know. Many have been cooped up inside all winter and want to get out in the dirt. I personally understand! But farming has changed, it’s become much more business oriented. I’ve watched some awesome farming families lose everything because they fought for “the lifestyle” rather than making the soundest business decisions. I understand, I love the lifestyle and tradition myself, but we also have to recognize “change”. The price of poker in agriculture has been raised! Sharp business owners and large investors are now much deeper in the space. Turning a profit is now essential to keeping the legacy alive!
For many the absolute best business decision is “prevent plant”. Unfortunately, many are being guided by their emotions. Business is about facts and numbers; lifestyle is about emotions and family. When the two start crossing paths decisions can become much more complicated. I’ve been there myself and made the mistakes often. But I know the business numbers for many are pointing to preventive plant. Chasing yield in this environment could be extremely costly with no guarantee of results. In other words, throwing all the extra money at this late-planted date could easily snowball into a losing venture. Taking “preventive plant” and re-owning in some capacity on the board makes a ton of sense.
When it comes to decision making, there are two approaches that almost always drive better results: ask other people for their perspectives and write things down. By asking others who are not attached you gain a different perspective and nullify your emotional bias. Also, by writing things down and having real numbers and facts to look at, you lessen emotional intensity. Play it all out on paper and make a well-educated decision. Shooting from the hip and going with the gut may have worked 10-years ago, but the volatility and margins in today’s world of agriculture can make that approach extremely dangerous. I don’t know the best answer for you and your family, but I believe I can help offer some guidance about the decision-making process. This is a very important decision at an important inflection point in your operation. It needs careful and detailed attention! I still think many producers and the market are using biased and wishful thinking about yields that can be harvested with late-planted corn.
Wishful Thinking: The attribution of reality to what one wishes to be true or the tenuous justification of what one wants to believe vs. reality. Describes the decision-making and the formation of beliefs based on what might be pleasing to imagine, rather than on evidence, rationality, or reality. Wishful thinking is also linked to optimism bias through which individuals tend to expect positive outcomes from events despite having little basis in reality. In other words, for many of us we’ve never planted corn this late, so we have no actual experience. We are hoping we can grow a good crop and prices will be north of $5.00 per bushel. News Alert… If we grow a good crop prices are not going to be north of $5.00. Again, play it all out on paper. The extra top-dressing, the extra fungicide costs, the extra equipment costs, the extra drying cost with the late-planted crop, negative impact on APH, etc… Christopher Booker once described wishful thinking in terms of the following…
“the fantasy cycle” … a pattern that recurs in personal lives, in politics, in history – and in storytelling. When we embark on a course of action which is unconsciously driven by wishful thinking, all may seem to go well for a time, in what may be called the “dream stage”. But because this make-believe can never be reconciled with reality, it leads to a “frustration stage” as things start to go wrong, prompting a more determined effort to keep the fantasy in being. As reality presses in, it leads to a “nightmare stage” as everything goes wrong, culminating in an “explosion into reality”, when the fantasy finally falls apart.
If you are looking to challenge your thoughts and perspectives as well as draw on Kevin’s 25 years of market and business experience, click HERE for a free — no obligation — trial of the Van Trump Report