Planting decision no brainer as US farms swap corn for soy
PLANTING decisions for US corn and soybean farmers are a bit of a no-brainer this year. After confronting the prospects of losses on both crops in 2016, soybeans are now more profitable, which means the world’s largest grower may harvest a record crop for a second straight year.
While corn is still king – it’s the largest US crop by value and volume – farmers from North Dakota to Texas are preparing to use more of their land on soybeans instead. That’s because cash prices have jumped 9.2 per cent since the 2016 harvest, creating the widest premium over corn in 29 years, and the oilseed is cheaper to grow.
“It’s the difference between choosing to operate in the black or in the red,” said Jon Mutschler, 48, who farms 2,500 acres (1,012 hectares) in Minnesota with his wife and son.
“The market is telling us to plant soybeans,” he said. Mutschler will sow 55 per cent of his land with corn, down from 67 per cent last season, and boost soybeans to 45 per cent from 33 per cent.
Seed technology that combats drought, bugs and disease is helping US farmers produce record amounts of corn and soybeans on every acre, but demand prospects are better for soybeans used to make animal feed, cooking oil and biofuel. Rising global consumption of meat, poultry, eggs and dairy has doubled the amount of soy-based meal in animal feed since 2000.
Most of that growth occurred in China, the biggest pork producer, where soybean imports have doubled in the past eight years.
Soybean prices in 2016 posted the first annual increase in four years, and they are up in 2017.
To maximise revenue and take advantage of the rally, American farmers probably will expand soybean planting 5.8 per cent to a record 88.27 million acres, the third increase in four years, according to a Bloomberg survey of 25 trading firms and analysts. Corn sowing may fall 3.6 per cent to 90.77 million acres, the biggest drop in three seasons.
Earlier this year, farmer surveys by researchers Farm Futures and AgriSource Inc. signalled the US will sow more land with soybeans than corn for the first time since 1983.
Most will be planted in May and June and harvested in September and October. After polling more than 2,000 growers in six Midwest states in January, AgriSource projected an 8.1 per cent jump to 90.2 million, more than the 89.7 million planned for corn.
The Department of Agriculture will release updated planting estimates at its annual outlook conference that begins Thursday in Washington. In November, the USDA’s preliminary forecast was for an increase to 85.5 million acres.
Choosing what to plant varies depending on the region and prices for difference crops. American farmers already have cut the acreage of winter wheat to the smallest since 1909, after a global glut of the grain sent prices to the lowest in a decade, USDA data show.
Soybeans have some competition across the South from cotton, after the price of the fiber rose to the highest since 2014. Growers will increase planting 9.3 per cent to 11.017 million acres, the National Cotton Council said Feb 11. “The drop in winter wheat acres means there are more acres that can go to both corn and soybeans,” but “farmers are nervous” that President Donald Trump’s tough talk on renegotiating trade deals could disrupt US export sales of corn to Mexico, said John Newton, director of market intelligence at the American Farm Bureau Federation in Washington.
“A lot of farmers are saying soybeans beat corn.”
Soybeans are gaining favour in part because futures prices for delivery after this year’s harvest indicate a widening profit margin over corn. For growers willing to sell now, nine months before the harvest, the November soybean contract has averaged 2.6 times more than December corn futures since Dec 16. That’s the best in 29 years.
“When the market offers a better price, farmers will shift acres,” said Dan Kowalski, director of research at CoBank, an agricultural lending cooperative based in Greenwood Village, Colorado. “Farmers are looking at increasing soybean acres and locking in a small profit and that helps to take risks off the table ahead of the planting season. They have good reason to be a little more optimistic.”
Soybeans for November are trading at US$10.16 (RM46) a bushel in Chicago, while the December corn contract is at US$3.96 a bushel.
In January, farmer sentiment surged for a third straight month to the highest since October 2015 as soybean and livestock prices rose, according to a survey released Feb 7 by Purdue University/CME Group.