May. 20, 2016
Rallying prices for soybeans are likely to encourage U.S. farmers to plant more of the oilseed this spring and could turn expected losses into profit.
They may also prompt growers to devote additional acreage to corn.
Historically, big gains in soybean acreage stemming from a spring price rally have gone hand in hand with additional corn seedings, with farmers cutting back on specialty crops that require more care on hopes that corn prices will catch up to the gains in soy.
Oklahoma farmer Jerod McDaniel said he is switching some acreage that he had initially planned to seed with sorghum to corn. Both corn and sorghum require applying nitrogen as fertilizer to fields before planting. The costly input would be wasted if McDaniel seeded soybeans in the same spot.
“I will put in as much corn as I can,” McDaniel said. “I kind of think you take your shots where you can right now.”
According to U.S. Agriculture Department data going back to 1980, the earliest year that the government’s report on what farmers intend to plant was available, corn acreage has risen from the March outlook in seven of the 10 years in which soybean acreage has posted the biggest gains from the initial forecast.
Gains in corn acreage have actually outpaced the soybean acreage increases in three of those years; in 1982, 1987 and 1997. During the seven years of big soy gains, when corn acreage has also grown, final soybean plantings have been an average of 1.704 million acres bigger than the March outlook, while corn acreage gains have averaged 1.332 million.
In March, the USDA’s prospective plantings report estimated farmers will plant 82.236 million acres of soybeans and 93.601 million acres of corn.
In the past, farmers have chosen to boost corn seedings along with soybeans even when gains in soybean prices have far outstripped the corn market’s performance.
During the seven years when corn acreage gains have accompanied big jumps in soybean plantings, corn prices have averaged a scant 0.3 percent gain throughout the planting season. Soybean prices have risen an average 3.8 percent by comparison.
This year, soybean prices have surged 17.9 percent since the USDA’s March planting forecast, while corn has gained 6.3 percent.
With the renewed strength in the futures market, coming at a time when concerns about plentiful global supplies and a choppy export outlook have cast a bearish tone over the market for much of the past year, farmers are looking at every acre available for seeding.
“If farmers can make money or break even, they find ground and they plant it,” said Tom Grisafi, a market adviser at Advance Trading.