Page 1
Currently Viewing: FE E-Watch: February 19, 2013
From the Desk of Dave Kanicki: February 19, 2013

From the Desk of Dave Kanicki

February 19, 2013

Last week’s National Farm Machinery Show in Louisville was a good one, if for no other reason than the fact that it was hard to find anyone who was too worried about the coming year in agriculture. To say that the manufacturers and dealers we spoke with were in good spirits would be putting it mildly.

I also had the opportunity to speak to a few farmers. One farmer from west Tennessee who farms about 1,500 acres of corn and beans, some cattle and “a little bit of cotton” said things were looking pretty good, but …

Since farmers seem to be able to find something to fret about, I asked him what, if anything, had him worried about the year ahead. He said if corn fell below $5 a bushel he wouldn’t be making any money. He cited recent slippage in the price of corn and the rising cost of inputs since last fall as things he’s keeping an eye on. He said he wasn’t too worried about the drought because his area had gotten some good rain the past few months.

In its initial 2013 forecast for farm net income and net cash income issued on February 11, I noticed that USDA also noted that total expenses “are forecast to establish a record high. Rent, labor and feed are the expense items expected to increase the most in 2013.”

The farmer I spoke with had mentioned fertilizer, including nitrogen and potash, as well as the cost of seed as his major concerns. “You know, Monsanto’s pretty much got us where they want us when it comes to seed,” said the farmer. “But you gotta buy good seed.”

He said he wasn’t yet sure about how much of what he was going to plant this year, but he was thinking about upping his soybean acres.

Based on an analysis of which crop would be most profitable in 2013 by JP Morgan, it might be a tough call. While corn would produce the highest variable profit ($290 per acre when including rent) vs. soybeans ($90 per acre when including rent), additional falloff in ethanol production — which was seen in 2012 — could lead to higher inventories and cause the price of corn to drop. Meanwhile, the demand for soybeans continues to expand, which is expected to push its price up in the year ahead.

Calmer Corn Heads

He also said that he’s going to hold off on any equipment purchases until later in the year — he usually buys used — though there were a couple of things at the show that got his attention.

So my conversation with the farmer from Tennessee wasn’t much help in trying to figure out what’s going to happen with equipment purchases this year. Neither were USDA’s estimates for 2013.

In a nutshell, USDA is forecasting farm cash net income of $123.5 billion, which is about 9% down from its 2012 forecast, but 47% above the 2002-11 average of $83 billion.

At the same time, the ag agency is projecting a record for farm net income of $128.2 billion, up 13.6% vs. its 2012 forecast.

As for 2013 cash receipts, USDA is estimating $392.9 billion, which is up less than 1%, though livestock receipts ($176.5 billion) should rise about 2.8%, with crop receipts falling 1.5% to $216.3 billion.

If you’re good with numbers, this information might give you an idea about what’s going to happen with ag machinery sales this year. As for me, I’m going with what the equipment dealers have been saying. Things look great through the first quarter of the year and pretty good through the first half. After that, it’s anybody’s guess and will depend on the weather.

So, I guess there’s nothing much new this year except for some of things we saw at the show. You can check those out in the March issue of Farm Equipment

Dave Kanicki,
Executive Editor
Farm Equipment
dkanicki@lesspub.com

COMMENTS: 1
Posted from: Luc Cazabon, 2/19/13 at 5:01 PM CST
Right on! We have many competitors who are going after our crops and are willing to do it "cheaper" it is coming and we need to be ready for the competition.

Post comment / Discuss story * Required Fields
Your name:
E-mail *:
Subject:
Comment *:
Please enter the characters that you see in the field below.
Verification:
Verification