Farmers in Iowa and across the Midwest will be planting plenty of corn and soybeans this spring. The situation is unlikely to offer financial relief for farmers in the middle of a prolonged decline in grain prices.
USDA’s 2016 planting intentions survey results released March 31 indicate farmers in Iowa, the nation’s No. 1 corn producing state, will plant 13.9 million acres of corn. That’s an increase of 400,000 acres, up 3% from a year ago. Iowa, also a top soybean growing state, is expected to see soybean acreage decline slightly to 9.7 million acres from 9.85 million in 2015, a 2% decrease.
Nationwide, farmers are projected to plant 93.6 million acres of corn this year, up 6% from last year. If realized, this would be the highest planted acreage for corn in the U.S. since 2013, and the nation’s third largest planted corn acreage since 1944. Farmers in the U.S. are expected to plant 82.2 million acres to soybeans this year, down less than 1% from last year, according to the USDA survey.
Higher returns are expected from corn than beans this year
Farmers are working to manage their cash flow and that’s why they’re planning to plant more corn this spring and cutback on soybeans, observes Michael Fritch, a farmer from Mitchellville in central Iowa. The increase in planted acres is mainly due to the expectation of higher returns from corn this year compared to other crops.
Steve Johnson, an Iowa State University Extension farm management specialist, agrees. “We heard at various meetings this past winter that farmers were going to plant corn to maximize income,” he says. “However, weather this spring could delay plantings and more farmers might then decide to plant more soybeans than corn. If we continue to have a wet spring, we could see some switching from corn to beans. The long-term weather outlook is conditions should be generally good for growing this summer. If that’s the case, then it would not be a good year for prices.”
As agriculture remains stuck in a period of low commodity prices the past couple of years, an increasing number of producers are struggling to cover their cost of production. Many have been forced to cut back on crop inputs such as seed and fertilizer to save money. Other farmers have restructured loans or have refinanced against other equity resources.
We need a drought to occur in some other part of the world
Bob Bowman, a corn and soybean farmer near DeWitt in eastern Iowa is planning to increase his corn acreage in 2016. He says a major factor in whether he can achieve a profit will be whether there are spikes in the market he can use to lock in prices for his 2,000 acres of corn and 600 acres of soybeans.
“There’s some hope built into this USDA planting intentions report because both corn and beans are currently projecting red ink,” notes Bowman. “I don’t know if at the end of this year if prices will be where we need them to break even, but we’re hoping sometime this spring or summer, something will happen somewhere in the U.S. or elsewhere in the world that will give our grain markets a reason to move upward.”
A challenging market situation for corn and soybeans
“Looking at the Planting Intentions report issued March 31, we had a USDA report that wasn’t all that friendly,” says Don Roose, president of U.S. Commodities in West Des Moines. “It looks to me like whatever you had last year as far as profitability or lack thereof, you can expect more of the same this year.” He says with adequate supply globally and no sign of an uptick in demand for corn and beans, getting a meaningful increase in corn and soybean prices would depend on weather during the 2016 growing season. “Keep your eyes on the sky from here forward,” advises Roose.
USDA’s Prospective Plantings report shows that in the current low price environment, farmers indeed prefer to plant corn in 2016. Chad Hart, ISU Extension grain economist, points out that corn has significantly higher yields compared to soybeans, so farmers are looking to corn and its higher output per acre as a way to boost cash flow.
Keep an eye on the market; be ready to sell on price spikes
In a separate report, USDA said corn stockpiles as of March 1 were 7.808 bushels, compared to 7.75 billion a year ago. Soybeans were estimated at 1.531 billion bushels, up from 1.327 billion a year earlier. That’s according to the quarterly USDA Grain Stocks Report issued March 31. “Farmers should keep an eye on the market and be ready to sell some grain if there’s an opportunity for a profit,” says Hart. “Know your breakeven cost for both corn and soybeans. If there’s a chance to hedge or lock in a price at a profit, I’d expect to do that.”
Given U.S. trend yields of 168 bushels per acre for corn and 46.7 bushels per acre for soybeans, “the projected acreage points to another round of massive crops,” says Hart. “Corn production would reach 14.38 billion bushels, which would be another record corn crop. Soybean production would approach 3.8 billion bushels, which would be the third largest U.S. soybean crop in history. And for markets already dealing with large supplies, these prospective plantings do not help. So the markets will be looking for Mother Nature to slow the supply train down.”
For farm management information and analysis visit ISU’s Ag Decision Maker site at extension.iastate.edu/agdm; ISU farm management specialist Steve Johnson's site is at extension.iastate.edu/polk/farm-management.