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SPRING RALLY: 2017 started the same as 2015 and 2016 — with flat prices after record corn and soybean production in many states, including Iowa. Prices are expected to rally this spring.

2017 acreage battle favors soybeans

Analysis: U.S. corn acreage is expected to be down about 4 million acres this year; soybeans up more than 2 million acres.

The battle for 2017 U.S. planted crop acres is officially underway. In mid-December, USDA released a preliminary forecast for planted acres as a part of the agency’s 10-year budget baseline. Nationally, farmers are forecast to plant about 90 million acres of corn and 85.5 million acres of soybeans. That would be a 4.2% decrease in corn-planted acres as compared to 2016, but only a 2.5% increase in soybean acres.

On Jan. 12, USDA forecast planted winter wheat acres would decline by 3.6 million acres. This would be the smallest winter wheat-planted acres since 1909. You can expect total planted wheat acres to be close to 48.5 million in 2017, based on USDA’s forecast. Also, consider that the Conservation Reserve Program is capped at 24 million acres, the lowest level in nearly 30 years.

Soybean acres to expand
The private analytics firm Informa Economics updated its 2017 planted acreage forecast on Jan. 24. Those numbers are as follows:
• Corn acres are projected to drop by 3.5 million acres to 90.5 million acres.
• Soybean acres are expected to climb nearly 6% to a record 88.6 million acres.

The significant increase in U.S. soybean-planted acres will likely be a combination of both corn and winter wheat acres. USDA will release preliminary planted acreage numbers again on Feb. 23 at its annual Ag Outlook Conference. USDA’s National Ag Statistics Service will use survey methods collected from over 80,000 farmers for the annual Prospective Planted Acreage Report to be released March 31. Keep in mind that the actual 2017 planted acres will not be confirmed until the release of USDA’s Planted Acreage Report on June 30.

Economics and spring weather will drive the final decisions farmers make regarding 2017 plantings. Iowa farmers will be challenged by the overall profitability of corn production at current new-crop futures prices. Soybeans will be a much cheaper crop to grow, but farmers could see prices decline, should record production be confirmed.

Iowa State University Extension economists recently released their publication “Estimated 2017 Costs of Crop Production,” FM-1712 revised. The total cost using conventional tillage and producing medium yields is $673.41 per acre for corn following corn, $631.18 per acre for corn following soybeans, and $483.11 per acre for soybeans following corn. The updated publication can be downloaded from the ISU Extension store online at store.extension.iastate.edu. It is also running online as File A1-20 on the ISU Ag Decision Maker website at extension.iastate.edu/agdm.

These ISU estimates represent typical costs for producing the crops and are only intended to be used as guidelines. Actual costs will vary considerably from farm to farm and can be entered in the column for “Your estimates” in the publication. Another option to figure your own cost-of-production budgets is to use the electronic spreadsheets available on ISU’s Ag Decision Maker website.

Get set for spring price rally
Although they’ve shown strength at times since last fall’s harvest, corn and soybean prices have been in trading ranges reflecting the big crops of the past two years and the prospects for ending stocks this coming August. Record crop production has been mostly offset by record use.

Recent USDA projections show expected corn-planted acreage in the U.S. to decrease about 4 million acres from last year and soybean acres to increase by more than 2 million acres. The decline in corn production would reduce some of the supply, which would allow prices to rise again, but only modestly.

As the 2017 planting season begins, market analysts expect corn prices to gain strength as piles of grain shrink, fewer acres are planted to corn and rumors of drought possibly develop. This uncertainty would create speculative buying.

The market response might be less for soybeans with the prospect for record planted acres and large South American production. Spring rallies usually occur each year for corn and beans, based on weather-related uncertainty. Assuming there are no large-scale production losses, you could expect crop prices to decline perhaps by early July.

Producers are encouraged to be prepared to take advantage of pricing opportunities when the market presents them. This holds true for both old- and new-crop corn and soybeans. Develop written marketing plans now for both crops — plans that are accompanied by emotional discipline to carry them out as marketing opportunities arise.

Johnson is an ISU Extension farm management specialist. Contact him at sdjohns@iastate.edu.

TAGS: Crops
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