Corn To Gain Some Acreage In 2010, But Don't Expect Big Shift

Corn To Gain Some Acreage In 2010, But Don't Expect Big Shift

ISU economist expects corn to take some acres from soybeans and other crops, but doesn't expect land shifts to be dramatic.

Strong demand is projected for U.S. corn and soybean crops in 2010. Looking at prospects for this spring's plantings, corn will likely gain some acreage from soybeans and other crops. But the land shifts will not be dramatic.

 

That's how Chad Hart, Iowa State University Extension grain marketing economist, is sizing up the picture. "Given the situation today, I expect corn plantings to be around 90 million acres in the U.S. this year, with soybean acreage falling to 77 million acres," he says. "As in previous years, other crops will lose some area to corn and soybeans."

 

Demand for Iowa crops has been helped by outside influences, especially the recovery in energy prices, notes Hart. Ethanol margins have moved above breakeven and support for biofuels has been boosted by the substantial rise in crude oil prices over the past year.

 

The energy price recovery has helped ethanol margins remain positive over the past several months. Biofuels continue to see support from higher energy prices.

The turnaround has allowed U.S. ethanol production to continue growing. Ethanol now ranks second only to livestock feed in terms of demand for corn.

 

Strong demand is projected for Iowa crops this year

 

Projections for the 2009 U.S. crop show more than 4 billion bushels of corn heading to ethanol plants, says Hart. Looking beyond to the 2010 and 2011 crop years, ethanol demand will continue to build as a result of the annual increases called for by the federal Renewable Fuels Standard.

 

In 2010, that standard requires production of 12.95 billion gallons of renewable fuels, up from 11.1 billion gallons in 2009. Corn-based ethanol will account for much of the conventional biofuel portion of the standard, increasing corn demand for ethanol to 4.4 billion bushels in 2010 and 4.6 billion bushels in 2011. Based on the renewable fuels standard, by 2015, over 5 billion bushels of the nation's corn crop could be used for ethanol production.

 

Corn feed and residual demand in 2010 is also projected to increase over this past year. Feed demand for the 2009 corn crop has declined with the financial woes facing the livestock industry.

 

Livestock projections show some price improvement


Poultry, dairy, pork and beef producers have been reducing their animal numbers. From higher feed costs, lowered demand with the national economic recession and the H1N1 outbreak, the livestock industry has encountered wave after wave of troubling news. But futures prices for livestock and feed products at the close of 2009 and into 2010 suggest reason to hope for a rebound in the livestock industry moving through the coming summer.

 

One sign of upcoming improvements is the projection for increased meat export demand with the drop in value of the U.S. dollar. For corn, livestock feed remains the largest demand category. But it is also the demand category with the weakest outlook. If the improved margins fail to materialize, feed demand will slip further.

 

Export demand for corn grain is expected to rebound


Corn export demand is expected to rebound as well, also supported by the continued weakness in the U.S. dollar as well as recent approvals of genetically modified corn varieties in
Mexico and the European Union.

 

For soybeans, exports are "the big story." The strength of export demand for soybeans has led USDA economists to increase their soybean export estimate several times. For example, China has already purchased more soybeans from the U.S. than Iowans produced in 2009.

 

However, Brazil and Argentina have shifted more of their land area to soybean production, which will mean increased competition for U.S. growers. A potential for a record-setting South American soybean crop has contributed to futures prices favoring corn for 2010. But crop input costs have come down from last year's highs, improving the economic outlook for both crops.

 

Cost of production estimated at $3.50 for corn, $8.67 for beans

 

Estimates from ISU Extension economists for 2010, show per-bushel costs of roughly $3.50 to produce corn and $8.67 for soybeans in Iowa. Based on projected prices and costs, corn holds an economic advantage for earning a return going into 2010.

 

"So, corn will likely gain acreage from soybeans and other crops in 2010," sums up Hart. "But the land shifts will not be large or dramatic. Given what we have today, I expect corn plantings to be around 90 million acres in the U.S. this year, with soybean area falling to 77 million acres. As in previous years, other crops will lose area to corn and soybeans."

TAGS: USDA Extension
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