In Part One, featured in our January issue, Feed & Grain looked back at the 2007 corn crop and its effect on wheat and grain sorghum acreage use and production last year, and the prospects for trade in 2008. In Part Two, we take a similar look at barley, soybeans and cottonseed supplies.
As pointed out in the first installment of this two-part series, the 2007 corn crop — all 90+ million acres of it — literally and figuratively, cut an extremely wide swath throughout the agricultural landscape. And its effects will continue to be felt this year.
“Last year was quite a beast in many respects,” says Steve Edwardson, executive administrator, North Dakota Barley Council. “Between acreage swapping, the burgeoning biofuels sector, a wildly volatile marketplace and simply getting a crop produced, there was nothing routine or ordinary about the 2007 growing season.”
No truer words.
With the marketplace prepping for a monster crop and the discussion turning to feedstock shortages, price volatility arrived early and stayed late last year. Like a houseguests who have overstayed their welcome, the volatility is still around today and showing no signs of leaving anytime soon.
“The marketplace this year is shaping up to be as unpredictable as last year,” says John Hoffman, president, American Soybean Assn. and a Waterloo, IA soybean producer. “Nevertheless, as producers and marketers, we need to listen to what the market tells us. So far this year, it’s telling us that it needs more protein and more soybeans.”
Nearly a straight swap
The planted corn acreage jumped nearly 12 million acres last year and people wondered from where that additional acreage would come. Well, on the surface, it would appear soybeans bore much of the brunt as acreage totals dipped a bit more than 11 million acres from 2006 totals (63.7 million in 2007 vs. 75.5 million in 2006).
However, there’s another story lurking behind these acreage numbers that delivered a domino effect of sorts in a variety of crops.
As export partner nations began worrying about tightening feedstock supplies coming out of the United States, the rush for feed grains intensified across the board. Obviously, customers were anxious about corn supplies but demand for soybeans, wheat, barley, grain sorghum and other commodities felt the squeeze too.
“Only a few years ago barley was in a minor lull as exports were concerned but as global demand increased and global stocks decreased we saw a rapid rise in activity,” says Edwardson. “It’s a rare occurrence when you can flip a marketplace around in a couple of year’s time. But we saw it occur in less than 18 months and really, much of it in 9 months.”
The dramatic turnaround in barley was a prime example of the “perfect storm” phenomenon seen in many grain markets last year. In 2005-2006, barley acres were trending down to flat in many areas, in favor of corn and soybeans. With better prices patterns for these other crops and a pretty healthy carryover of malt and feed barley stocks, the marketplace was somewhat stagnant.
Like a thunderhead that forms in a Northern Plains summer sky, crop failures in Australia, a buying frenzy by Pacific Rim customers, numerous ethanol plant openings pushing corn prices, all conspired to generate a lot of heat and humidity as 2007 approached.
Now, growers could justify boosting their barley plantings at the expense of soybeans, cereal grains and in some cases, corn acres to capitalize on the barley boom. And what a boom market it was.
“Feed barley prices in July of 2006 were about $1.40/bushel,” Edwardson recalls, “A year later they were hovering between the $3.00 and $4.00 range, and by October we were seeing some markets topping $6.00 per bushel.
“To top it all off, this occurred in a market where we saw a near 20% increase in harvested acreage over the previous year. It was truly an amazing year,” he admits.