Acreage Battle

July 18, 2007--8:45 am:

As prices fall back from highs and market emotions subside, there are a few different aspects of the phrase "acreage battle" that need to be discussed and committed to memory for future use.

First of all, make no mistake, although prices have notable downside potential to experience during the next few months if normal weather finishes off the 2007 growing season, all crops will still have some anxiety about their share of acreage for the next growing season. The demand base continues to build and the marketplace is still shifting through the process of trying to take prices to levels needed to spur global production enough to satisfy the new demand bump caused by the "food for energy" agenda.

Corn was the first market to experience the need to buy acreage, and it appears now that corn will be the first market to see prices slide on the apparent reality that the price discovery process achieved its goal of adding adequate acreage and supplies. As corn prices slide, it will impact the price needed by other crops to gain back some of their acreage lost to corn in 2007.

However, the big influence on 2008 acreage will be producer reaction to disappointing corn prices during the 2007 harvest season. I can already sense a strong anger in the country about being enticed to plant more corn and then only to find now the expected prices for harvest to be sharply below earlier expectations/hopes. While some can argue producers had opportunities to make forward sales, the reality is that most production was not forward priced and therefore it will be the "spot" price that determines producer attitudes about the entire situation. Talk of $5 corn was widespread and the "expected price" played a significant role in 2007 producer decisions, not just the prices that were offered.

Consequently, producers are already saying they will be much less willing to embrace 2007-styled acreage for 2008. The question is how much will producers scale-back their corn acreage...will it be partial reductions from 2007 or a desire to quickly return to something closer to their 2006 acreage mix?

No matter how depressed corn prices may be this fall, the market knows it can't afford to let US 2008 corn acreage fall too far from 2007. Yes, the acreage battle discussion will begin again as soon as harvest unwinds and continue well into early 2008.

How do you plan to react to cash corn prices in the sub-$3 zone and possible in the sub-$2.50 zone if these levels are achieved during the 2007 harvest season?