Growers to shift away from corn acres, back to soybeans, wheat

By Jennifer Bremer

The much-anticipated U.S. Department of Agriculture prospective plantings report, released March 31, showed producers making a shift from corn acres back to planting soybeans and wheat.

Corn growers intend to plant 86 million acres of corn in 2008, down 8 percent from last year, when corn acres were the highest since 1944. Soybean producers intend to plant 74.8 million acres in 2008, up 18 percent from last year, but 1 percent below the record high acreage in 2006. Wheat planted area is estimated at 63.8 million acres, up 6 percent from 2007.

"The market reaction to the report was immediate," said Kansas State University Extension grain economist Mike Woolverton. "The sales of thousands of futures contracts took soybeans down the daily limit. Greater than expected spring planted acres and larger than expected quarterly stocks pushed wheat prices down sharply on all three exchanges.

"Even though the drop in corn acres will be only 8 percent less than last year, the news caused corn price to jump to futures contract highs, continuing the long term upward price trend for corn," he said.

Woolverton said another major factor affecting soybean prices is the record large Brazilian soybean crop.

"If 74.8 million acres of soybeans are planted, harvested acreage might be near 73.8 million. With a national average yield near 42.5 bushels, the 2008 crop would total about 3.14 billion bushels, 115 million more than the level of consumption expected during the current marketing year," said Darrel Good, University of Illinois Extension economist. "Current price relationships suggest that actual planted acreage of soybeans in 2008 should fall short of intentions."

The largest increases in soybean acres are expected in Iowa and Nebraska, up 1.25 and 1.2 million acres, respectively. The soybean crop will be the third largest in history.

The decrease in intended acreage of corn is not sufficient to supply the projected rate of consumption and implies that corn prices will have to increase to slow consumption and/or producers will have to plant more acreage than intended, according to Good.

National Corn Growers Association president Ron Litterer is cautious about the March projections since decisions will differ, up until the seeds are in the ground.

"The corn acreage projections also have a tendency to go up. Last year, for example, there was a difference of more than 3 million acres between the March estimate and the final number," Litterer said. "USDA's March report has underestimated actual corn acres in each of the last four years."

A clearer view is expected once the June report is released.

"Based on what we've heard from our growers, and if the weather goes our way, we're confident we will produce another good crop," Litterer said. "We're committed to meeting all needs--food, fuel, feed and fiber, and we are heartened by the trend toward higher yields that maximizes how much corn is produced per acre. Farmers are becoming more efficient and more productive."

If 2008 corn production falls much below the 12.5 billion bushels that 86 million planted acres will shell out at trend line yield, Woolverton says it will be difficult to meet projected demand and keep corn price high for another year.

Planted acreage intentions for all crops included in the report exceed last year's planted acreage by about 4.8 million acres. Harvested acreage of hay is expected to decline by 1.04 million, and cotton acres are also expected to decline 13 percent from last year.

The prospective plantings report provides a benchmark for anticipating actual planted acreage, according to Good. Planting season weather and changes in relative prices will be monitored closely for judging changes from intentions.

"The big question is, will corn producers really leave so much money on the table?" said Good.

Woolverton agreed, "The USDA reports did little to reduce the uncertainty faced by grain and oilseed producers. The list is growing longer--input cost and availability uncertainty, weather uncertainty, price uncertainty and acreage uncertainty."

A wet winter and spring in the Corn Belt have delayed the start of field operations. Persistent rain and snow has pushed the estimated start of corn planting into mid-April at the earliest. Although corn producers can plant lots of acres quickly, some wonder if the USDA estimated acres will get planted. If the crop is planted late, some are concerned that yields will drop well below trend line.

"One thing we can say for sure; uncertainty about the number of spring planted crop acres will not be resolved until the seed is in the ground," said Woolverton.

Jennifer Bremer can be reached by phone at 515-833-2120 or by e-mail at jbremermaj@hotmail.com.

4/7/08
1 Star WK\6-B

Date: 4/3/08

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