acreage

Weekly Outlook: Corn Acreage in 2019

Corn prices since the release of the February USDA reports remain relatively flat. The potential for increased corn production in 2019 via higher planted acreage appears to be a significant component to corn price performance relative to soybeans. This analysis looks at the current acreage priced into the market and possible implications for corn prices moving forward.

Despite a projection of the current market year stock-to-use ratio near 11.7%, corn prices continue to underperform soybean prices. The relative strength of soybean prices persists even with stock projections at record-high levels for the 2018-19 marketing year. Since 2006, a harvest price soybean-to-corn ratio above 2.4 in January and February sent a clear signal of reduced corn acreage. A ratio below 2.3 indicated an increase in corn acreage. Since the start of January, the 2019 harvest soybean-to-corn price ratio averaged 2.37 for daily closing prices on December corn and November soybeans. This year, through February 14, the ratio does not send a clear indication of expanded corn acreage during 2019.

Speculation surrounding the potential trade issues with China may help to explain the relative strength of soybean prices. The potential benefit to corn prices via exports of grain, ethanol, and distillers’ grains seems no less bullish with a trade resolution. A few fundamental factors may be weighing on corn prices. The recent weakness in ethanol production combined with lower feed and residual use projections for this marketing year provide some concern. Possible large corn crops in Argentina and Brazil may impact the level of U.S. corn exports in 2019. The relative weakness of corn prices reflects many of these issues, but the potential size of the 2019 crop may be the most substantial factor. A general expectation of increased acreage exists in the market. It may be useful to determine the size of the 2019 corn crop currently being priced in the market.

In determining the acreage priced in the market for the 2019-20 marketing year, a calculation of the seasonal average farm price for the U.S. is necessary. The USDA estimates the average cash prices received and the average closing futures price for each month during the marketing year. Using the difference over the last five years as a basis for the calculation, the closing futures prices on February 14 indicated a marketing year farm price of $3.81 per bushel. The relationship between the average farm price and the stocks-to-use ratio provides a method to determine potential supply and demand of corn during the marketing year. For this analysis, a $3.81 average farm price indicates a stocks-to-use ratio of 11% for the 2019-20 marketing year. The estimated relationship between price and the stocks-to-use ratio uses data from the last five marketing years.

A projection of consumption levels in the 2019-20 marketing year is required to estimate the crop size from the calculated stocks-to-use ratio. Total corn use over the last three marketing years, including the current marketing year projection, averaged 14.77 billion bushels. The current marketing year projection for corn use sits at 14.865 billion bushels. The prospect of continued corn use at current levels seems reasonable given the low corn prices in place. By assuming the same total use next marketing year, a stocks-to-use ratio of 11% infers ending stocks for the 2019-20 marketing year at 1.635 billion bushels. If the current projection for this year’s ending stocks of 1.735 billion bushels is correct and imports total 40 million bushels during 2019-20, the corn crop implied by the current market price equals 14.725 billion bushels, 305 million bushels larger than the 2018 crop.

Assuming the 2019 U.S. corn yield come in near a linear trend value of 174.6 bushels, a crop size of 14.725 implies harvested acreage for corn at 84.33 million acres. Planted acreage averaged 7.4 million acres above harvested acreage over the last five years. Using the average difference of 7.4 million acres, the projection for corn planted acreage in 2019 sits at 91.7 million acres, up 2.6 million acres over 2018. If one boosted corn yield to 176 bushels per acre, planted acreage of corn falls to 91.1 million acres.

The March Prospective Plantings report, due for release on March 29, provides the first indication of 2019 spring crop acreage. This analysis indicates that market prices place corn acreage in the range put forth by various government and industry analysts. Issues with fall fieldwork in many areas of the Corn Belt combined with increased input costs, particularly with fertilizer, may work to lower corn acreage this year given the current price scenario. The potential upside for corn prices given lower than expected planted acreage, a short crop in 2019, or a resolution to the trade dispute sparking increased consumption seems strong given current prices.

This article – Corn Acreage in 2019 – originally appeared on farmdoc daily.

OWL Executes Delaware Basin Produced Water Agreement and Acreage Dedication

Oilfield Water Logistics, LLC, through its wholly-owned subsidiary OWL SWD Operating, LLC (“OWL”), executed a new 7-year contract for gathering and disposal of produced water covering approximately 20,000 dedicated acres in Lea County, New Mexico. OWL’s in-place network of expandable midstream water infrastructure overlays the core Northern Delaware Basin acreage of leading producers, enabling OWL to uniquely serve its customers’ water needs.

“OWL has longstanding relationships with its customers in the Northern Delaware, and we are proud to continue to play a meaningful role in their large-scale development plans,” says Chris Cooper, CEO and President of OWL. “We are committed to continuing to provide the necessary midstream water infrastructure to ensure our customers can maximize oil production.”

As Avalon and Wolfcamp oil, gas and water production in the region continue to set records, OWL is positioned to handle its customers’ and the broader industry’s growing water volumes. OWL is pleased to have partnered with leading E&P companies in the Northern Delaware Basin and, through OWL’s extensive contract portfolio, is committed to helping customers achieve their vision.

About OWL

Oilfield Water Logistics, LLC provides midstream water infrastructure and services to the energy industry in Texas, New Mexico, Colorado, Utah and Wyoming, with offices in Midland, Denver and Dallas. OWL is an established leader in the Permian Basin and owns and operates the largest commercial produced water gathering and transportation system in the Northern Delaware Basin. OWL is a portfolio company of NGP Energy Capital Management. www.oilfieldwaterlogistics.com

View source version on businesswire.com: https://www.businesswire.com/news/home/20190219006071/en/

SOURCE: Oilfield Water Logistics, LLC

TaLiea Wright 214-292-2011 twright@oilfieldwaterlogistics.com

Copyright Business Wire 2019

AgCenter expert: Sugarcane acreage likely to rise in 2019 for Louisiana

NEW ORLEANS—Sugar cane is on the rise in Louisiana, with a good crop and decent prices encouraging more farmers to plant the tall tropical grass.

Stable sugar prices and a resilient crop are big reasons, LSU AgCenter sugar cane expert Kenneth Gravois said Wednesday.

In spite of a soggy harvest season, he said, the 2018 crop set records for tons of cane sent to mills and tons of sugar produced. And prices have been about 26 cents a pound for raw sugar, he said.

Joe Denais, whose farm is in the Vermilion Parish community of Andrew, said he used to plant mostly rice, but prices of $16 per 162-pound barrel prompted him to cut back on rice and expand his sugar cane fields.

"It was hard to make money at $16 unless I started crawfish farming," he said — many farmers double-crop rice and crawfish. "I decided to go to cane instead of crawfish because everybody's getting into crawfish now," Denais said.

Denais, who started farming at age 18 with 100 acre in 1994, said he has increased his sugar cane fields from 1,900 to 4,700 acres over the past few years. Now 43, he hopes to plant up to 1,800 new acres of sugar cane this year, if he can buy 500 acres to go with 1,300 he already owns.

Gravois said farmers harvested 459,000 acres of cane between late September and mid-January, both for harvest and for seed cane. That's 19,000 acres (more than the previous season.

"Will we have that much of an increase this year? We don't know. But we are increasing," Gravois said.

Louisiana generally has a bit more land planted in sugar cane than Florida. However, because Florida's growing area is farther south and its growing season longer, it generally produces more sugar. Texas is far behind; Hawaii's last sugar cane harvest was in 2016.

Sugar beets, grown in the North and West, produce about 55 percent of the nation's sugar, according to The Sugar Association, a lobbying group.

The state produced a record 1.84 million tons of sugar from the 2018 crop, beating the previous record, set just a year earlier, by 20,000 tons The previous record for tons of cane was just under 16 million in 1999.

Last year's acreage included 424,000 acres harvested for milling; the rest either was kept as seed cane or couldn't be harvested because the fields were too muddy for the heavy equipment required.

Gravois said acreage is expanding mostly to the north and west, in Pointe Coupee, St. Landry, Avoyelles, Vermilion and Rapides parishes. He noted that sugar yields have more than doubled over the past 50 years, largely because of new varieties developed at LSU, the U.S. Department of Agriculture research unit in Houma, and elsewhere.

The 1970s yield was about 4,000 pounds of sugar per acre. In the past two years, the yield was about 8,800 pounds of sugar per acre, Gravois said.

And while one planting generally used to provide three crops, that's now up to four and sometimes five, letting farmers plant less seed cane each year, Gravois said.