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Best of NAMA 2020

Tim Glenn, Marketing Director, Pioneer Hi-Bred, Johnston, IA

We at Pioneer Hi-Bred maintain close relationships with our customers through our sales rep agency network. During the past seed sales season, this allowed us to collect input about planting intentions early, letting us know that this was going to be an unusually large increase in planted corn acres.

In the 2007 planting season, many of our customers were expanding their corn acres by planting corn-after-corn for the first time. For those, we initiated a national information campaign - using our North American agronomist and account manager network, extensive agronomy research expertise, multi-faceted communications executions and one-on-one relationships with growers - to provide extensive, detailed information on corn-after-corn production information to help our customers succeed.

One aspect of the marketplace that we believe will continue is volatility around acres planted. This will continue as part of the new demand-driven reality in this market. Certainly, no one can confidently predict oil prices; this will have an impact on both production estimate costs and ethanol forecasts.

For the 2008 growing season, Pioneer made the decision to increase its corn production acres significantly to meet that demand and potential volatility in acres planted. And Pioneer has dramatically increased the number of products with technology traits to complement the high-yielding genetics offered to our customers. We believe we will be well equipped to meet the demand on corn acres in North America for this next year.

What can we and our customers do in this new market? It's more critical than ever to monitor the changing marketplace and understand the implications of this business. For growers, this means being good marketers - being smart about input investments and getting expert advice on those purchases, as well as looking at the various options on marketing grain.

We have potentially entered an exciting new age where agriculture is playing a much more visible role on the national stage. It's important that we manage this opportunity well and work with our customers to make the most of these prospects.

Travis Dickinson, Head of Marketing - NAFTA, Syngenta Crop Protection, Greensboro, NC

In February 2006, ethanol reports indicated a major surge in demand for 2007. Later that summer, by June 2006, Syngenta had reflected upside scenarios for 90 million acres in our supply plan for the 2007 season. Having said that, we did not anticipate 93 million acres until the USDA report came out.

The obvious short-term implications affected supply and logistics. The more profound effect is long term - ethanol has become a major economic driver for agriculture as a whole. Commodity prices are up, and a number of public entities are forecasting solid prices into the future. The industry really needed this improvement long term.

Syngenta adjusted everything from supply to long-term strategy to adapt to these changes in the corn market. For us, it reinforced the critical need for our practice of scenario planning and market sensing, as well as playing on our strengths of global market presence and understanding of international agricultural market dynamics.

There were spot shortages, but they did not appear to be significantly different than other years with the exception of certain seed hybrids/maturity zones. 

With corn stocks down, soybean commodity prices strong and several other variables, 2008 may be as difficult to call as 2007. Current syndicated market research indicates roughly flat acres as compared to this year.

Michael R. Rahm, VP/Market & Economic Analysis, The Mosaic Company, Plymouth, MN

At The Mosaic Company, we began to expect monster corn acreage when the 2007 new crop price began a harvest rally in mid-September. Harvest rallies have occurred only a handful or so times since 1970 and if harvest rallies were gorillas, the one last fall clearly was King Kong!

While it became clearer and clearer that large increases in corn acreage and nutrient use were likely, fertilizer shipments got off to an extremely slow start last fall. Industry statistics indicated that combined shipments of the main solid fertilizer products during the first six months of the fertilizer year (July through December) were off 4% from the low level of the previous year and were off a whopping 18% from the most recent analog year (2003-2004).

If our demand forecasts at that time were on target, we estimated that shipments during the last six months of the fertilizer year (January through June) would have to increase 27% from the previous year and 10% from the analog year. Due to the large number of nitrogen and phosphate plant closures during recent years, producers and distributors would have to accomplish this from fewer production points than in the past.

This situation had all the makings of a logistical Perfect Storm - large projected increases in demand and extremely slow fall movement. Stock-outs looked likely in the spring.

We prepared for the Perfect Storm by working with rail carriers to get more rail cars lined up for peak spring shipments. The railroads came through with adequate car supplies last spring. We advised customers of the situation and encouraged them to fill earlier than normal in the spring. They responded. We also positioned as much product as we could at our inland warehouses.

The weather "cooperated" in many areas with timely rains providing a window to re-stock depleted inventories. We executed unconventional product moves and incurred sub-optimal freight costs to insure customers had product to meet demand. Sporadic stock-outs occurred but were not widespread.

We estimate that the domestic pipeline was drawn down to near empty in most parts of the U.S. For example, although official statistics are not yet available, we estimate that U.S. phosphate use likely increased about 8% during the fertilizer year that ended June 30. Yet domestic shipments of DAP and MAP increased just more than 5% last year. We estimate that a de-stocking of the pipeline made up this difference.

Looking ahead, nutrient demand prospects this year are shaping up as good if not better than last year. Unlike last year when corn was the main driver of nutrient demand, the three main crops will compete hard for acres this year.

U.S. nutrient demand is one factor pulling up fertilizer prices, but the positive impact of high grain and oilseed prices on nutrient demand is not confined to the U. S. We expect record fertilizer use in Brazil this year, eclipsing the previous record set in 2004, and Indian nutrient demand has increased more than 40% during the last five years.

Charles Sukup, President, Sukup Manufacturing, Sheffield, IA

A 13 billion bushel corn crop drives a tremendous need for grain bins across the country. There are a number of factors driving the need, one of which is the on-going shortage of storage, not just for this year's crop, but also previous years. Industry experts have known for some time now that there was a definite need for more storage, but the recent increases in corn yields have made the need even more urgent and have sent farmers and elevators scrambling to get their bins built.

The need for additional storage is felt throughout the country, not just in the areas traditionally known for producing corn. We're seeing a large shift to corn from soybeans and cotton in the South and that's driving a lot of sales in that area. When you consider that one acre of corn produces about three times the yield of an acre of soybeans, it's clear to see that demand for storage is definitely going to increase.

Sukup Manufacturing Co. entered the bin business in 2001. We felt that, due to consolidation within the industry, we needed to take control of our destiny and produce our own bins.

People within the industry, including our dealers, scratched their heads and couldn't understand why we would want to start producing our own bins. Now, they (and we) say it's the best move we've ever made. We saw steady increases in sales for the first few years, but the past year or so, it has skyrocketed.

One of the first indicators we saw for the record corn crop was the increase in the ethanol industry. More and more plants were being built, and every time a plant went up, so did bins, both at the plants and on the farms surrounding the plants.

We have hired more than 100 people since the first of the year to meet the increased demand for bins. We now employ approximately 350 people and are continually hiring. We've added extra shifts. We've also taken the big step of purchasing another bin line. The new equipment should be ready for the 2008 season and will double our bin capabilities.

The current demand for bins is definitely pushing the entire industry to its limits. That's why we're taking steps to increase our production capabilities. The market is getting to the point that whoever can supply the equipment in a timely manner will get the sale. We want to be the company who can get the product out while still giving our customers the quality they demand and expect from the Sukup name.

Sam Acker, Harvesting Marketing, Case IH, Racine, WI

Late in 2006, we started to sense that more acreage would be shifting to corn. Normally, prices drop during the heart of the harvest season. Instead, huge ethanol demand pushed corn prices up. We pay close attention to USDA reports and global forecasts, and by year-end all indicators pointed to increased corn acreage.

Because acreage has shifted to corn, prices of other commodities have remained strong. That bodes well for net farm income - the primary driver of farm equipment sales.

But unlike seed sales, which are the first to show the impact of higher acreage, there is a lag time in equipment purchases. Farmers are conservative business people and won't generally invest in larger-ticket items until after harvest when they have the dollars in their pockets. Case IH expects equipment sales to be up from 2006 based on commodity price strength.

One of our tasks as marketers is to forecast the appropriate product mix. For example, with more corn acreage many farmers are planting corn-on-corn instead of traditional corn-soybeans rotations. That means they are dealing with additional residue, both at planting and harvest, which can affect soil moisture and germination rates.

Case IH introduced a new chopping corn head for combines this year, which will be a very well-timed product to process residue at harvest. Case IH also offers a variety of tillage tools to help prepare high residue fields for planting.

Increased corn planting has impacted cotton production in a big way, with acreage down about 25% in the U.S. This will affect everyone in the cotton supply chain. Our dealers in Southern states who sell equipment for cotton production have adapted by selling more equipment for corn production.

Many growers who switched from cotton to corn have scrambled to find wide-row corn heads. While most U.S. corn is planted in 30-inch rows, most Delta cotton growers planted corn in the same 36-, 38- or 40-inch rows that match their cotton production system. Used wide-row corn heads have been in great demand this year in the South.

It will be interesting to see how Southern growers respond to their experience with corn production. If they have a good crop and a good year, they'll probably continue to grow corn instead of cotton. Otherwise they may go back to growing cotton that they are familiar with.

We expect corn acreage to hold at about the same level for 2008. For acreage to increase substantially, corn prices will have to increase relative to wheat and soybeans, and production will have to move into non-traditional regions.

Drought-tolerant varieties could move corn production further West. If that happens, Case IH dealers in those regions will be prepared to respond to customer needs with appropriate equipment lines.

John Hester, General Manager, Nichols Ag, Nichols, IA

Our two crop input retail locations are located in the heart of the traditional corn country - southeast Iowa.

We started driving our customers to more corn-corn rotations in 2006. The advances in corn hybrids and traits were netting our customers $100 more net per acre over soybeans, so it made good economic sense to move in that direction. The trait that is especially important is the rootworm resistance.

If a retailer didn't make money this year, they shouldn't be in the business. Our fertilizer sales were up 30% over last year and would have been higher if we had gotten all of the product we wanted.

Of course, we had a wonderful seed corn sales year. We handle DeKalb, Asgrow and Northrup King. However, finding the right hybrid was a challenge, at times.

In our area, our workload this spring increased some, but not all that much. We still had the same total number of crop acres to custom apply, but did need to make one additional trip for spring fertilizer on corn. However, we had some hard rains during planting season that gave us the opportunity to spread out the work a little.

Looking forward to next year, we are expecting to have similar or more corn acres. The three main variables are the increasing cost of inputs, land rents and the price of corn.

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