MT and some other discussion had me asking myself if perceptions are correct.......... my perceptions primarily...... with all the "record" crop projections the last several years....... .... so I did a little math after I saw an acre history graph this morning.
Wheat acres as reported, have declined just over 36% since 1987........
Ethanol.........Corn............With all the claims of gains through ethanol and those pesky "subsidies" through mandates etc etc etc...... the future is much brighter than wind energy without a subsidy...for ethanol
So is the subsidization of ethanol skyrocketed production in corn?
Did all those wheat acres go to Corn?
One has to wonder why on earth anyone puts wheat in a bunker and sits on it for three years......... then plants less of it.... ?? and why does the market still hold it at higher value than Corn in a futures sense..... the "fake" market....... when it is clearly has less value to the US economy(obvious through basis charts and US production trends)
With wheat loosing 20+ million acres in the last 30 years, and the planted acres of cotton up only modestly at at best a couple million acres(very questionable data), overall planted acres for the 4crops being up about 12-13 million acres, corn must have skyrocketed acres into those massive record on record crops approaching the "projected" 15 Billion bushel area..........wrong....
Monsanto trying to force one more trait technology into the market I should have been fully aware of where acres have gone. In the last 30 years corn acres have gone up 17% just a little more than planted acres overall....... Soybean acres in the last 30 yrs have increased 53%...............
When you look at the development of all 4 commodities historically, all four have had strong pushes of expansion and value that can be tied to the infusion of technology and its ability to enhance acres manpower and effecient production.
It can be argued that wheat was the first with the advent of chemical fallow and notil rotations..... and now is just too easy to produce world wide. So the most cost producer declines for lack of profitability.
cotton was next with the need to control the weevil and RR/ 24d chemical resistance.... those technologies became world travelers and china now produces the most cotton in the world.
Corn was next and although monsanto will keep "changing the color", the primary technology benefits are gone and the new traits struggle--nature adjusts quickly.
Beans are the current and only one in a stage of growth because the market and $$$'s available continue to rise...
Not only have beans increased acres by 53% in 30 years they have also increased price by 50%...........a good place for chemical investment.
No matter how technical we become production is going to settle in a least cost environment.
Re: production changes
I believe you got to your conclusion before the end: "So the most-cost producer declines for lack of profitability". Profit (per acre) is where it's at. Of course, we're talking the most profitable rotation on your ground, not just the most profitable single crop. And every farmer is different and every piece of ground is different so it is pointless to try to convince anyone "your" system is superior. Do the chemical companies budget R&D into that? Of course, because an unprofitable operation has no margin to spare on marginal improvements. And the companies believe in value pricing, as I'm sure you would were you running their companies. They don't say "This costs us $1/acre to make so we'll charge you $1.25." They say "This will increase your profit $10/acre, so we'll split that with you and charge $5/acre." After the patent expires and the generics come out, THEN they compete on production cost.
So in order to make their investment back on wheat improvements, they would have to offer a BIG improvement in profit, since there is little margin (negative?) to begin with, and fewer acres overall. But soybeans enjoy growing demand and growing acres, making it the obvious spot to put your R&D money into.
The silver lining in the story is demand, which has *almost* kept pace with *record* crops the last 4 years. Unless those genetics are also giving us ideal weather, eventually there will be a hiccup to absorb the excess inventory and (hopefully) get prices back to profitable levels. In the mean time, watch your free cash flow!
Re: production changes
Just preaching to the choir here.........But it looks to me that wheat needs to lead the next big bull run in grain prices...........................and..................the sooner, the better.