Saturday, 05 January 2013 02:30
CHICAGO: The so-called battle for acres on US farmland heated up in December when soybean prices rallied to a six-month high against corn, which could be a catalyst for increased soy production. New-crop November Chicago Board of Trade soybeans gained more than 55 cents on December corn in December, solidifying some farmers' decision to boost their soybean seedings.
Many were already leaning in that direction because the worst drought in the Midwest in more than 50 years last summer took a heavier toll on corn than soybeans.
Mark Degler, a farmer in Mattoon, Illinois, said he was strong on corn and "just got burnt too many years in a row" so is moving back to soybeans because it is more expensive to put out corn.
New-crop corn futures dropped below $6 a bushel for the first time in six months in late December, and Degler said it would take a rally back to $8 a bushel to entice him to increase his corn acreage.
"Reality comes knocking eventually," Degler said. "We have had three soft crops in a row."
Corn yields on Degler's 1,000 acre farm averaged just 80 bushels per acre in 2012 while soybean yields were in the 40s. In Coles County, Illinois, where Degler lives, the average corn yield from 2007 to 2011 was 169.3 bushels per acre. Soybean yields during that time averaged 51.8 bushels per acre.
During the past 30 years, soybeans futures, on average, have been priced at 2.2 times the prices of corn, according to Daniel O'Brien, agricultural economist at Kansas State University.
Soybean futures closed 2012 at 2.17 times the price of corn.
Since 1973, the end-of-year spread between the two commodities was the biggest in 1987, when new-crop soybeans were 3.1 times the price of corn. The following year, farmers boosted their soybean seedings by 660,000 acres, or 1.1 percent.
In 2001, soybean prices were just 1.7 times the price of corn, their smallest end-of-year advantage. Farmers raised their corn seedings by 3.19 million acres, or 4.2 percent, the following spring.
In general, growing corn is a more expensive proposition than soybeans, mostly due to the amount of fertilizer needed to seed corn. But higher yields for corn typically make up for the additional input costs.
On high-productivity farmland in central Illinois, the net return on corn plantings averaged $119 per acre from 2005-2011, according to the University of Illinois. That compares to $64 per acre for soybeans.
The profit expectations make it difficult for farmers to cut back on their corn seedings, even with the higher risks and a 9 percent drop in new-crop corn futures during the fourth quarter of 2012.
A survey of more than 1,550 farmers showed that growers plan to boost their corn plantings by nearly 1 percent to 97.75 million acres in 2013. Soybean seedings were seen down 0.47 percent to 76.84 million acres, according to the survey by the Farm Futures Magazine.
Joe Vaclavik, president of Standard Grain, a commodity brokerage in Chicago, said he believes that corn acreage will continue to be big. He said 98 million acres of corn in 2013 is still likely but "a bigger move in the ratios could persuade more bean acreage."
Center>Copyright Reuters, 2013