Shift to Corn Acres Changes Price Outlook

Both Iowa and U.S. corn plantings are way up, soybean acreage is way down.

The ethanol industry's hunger for corn is having a huge effect on the number of acres planted to corn in Iowa and the U.S. this year. It's also impacting soybean acreage. Corn acres are way up and bean acres are way down this year. The impact this big shift in acres will have on the rest of the world is very important.

USDA's 2007 Planted Acreage report, released June 29, shows that corn planted for all purposes in the U.S. this year is estimated at 92.9 million acres, up 19% from last year and 14% from the amount planted two years ago. The number of acres planted to corn in the U.S. in 2007 is the largest since 1944.

Iowa corn acreage up 13%
Iowa's corn acreage for 2007 is estimated at 14.3 million acres—the second largest corn plantings ever for Iowa. Iowa's corn acreage for 2007 is up 13% from 2006. Iowa farmers have just missed eclipsing their all-time record of 14.4 million acres of corn planted, which was set in 1981.

"Obviously, more acres switching to corn is the big story," says Joe Prusacki, director of the Iowa Ag Statistics Service in Des Moines. "But the other side of the story is that soybean acreage has shrunk to the lowest level since 1995 in terms of planted acres in the U.S. this year."

USDA's June 29 acreage report, based on surveys and field acreage estimates gathered in June, shows 64.1 million acres of soybeans planted in the U.S. this year. That's down 15% from last year's soybean acreage nationwide.

Iowa's soybean acreage for 2007 is 8.8 million acres, down 13% from the 10.2 million acres planted in 2006.

Brazil will grow more beans
The impact these acreage changes are going to have on supplies and prices for corn and beans in the U.S. and the rest of the world is extremely important. Soybean prices are already moving higher, and market analysts say it will take $9.50 or higher soybeans to get Brazilian producers to expand soybean acres.

"These U.S. acreage numbers show that farmers have spoken," says Don Roose, president of U.S. Commodities, a brokerage firm in West Des Moines. "They looked at the profitability of corn versus soybeans last winter when they were deciding what to plant, and they opted to go with more corn."

Roose says USDA's June 29 acreage report will likely encourage farmers in Brazil and other South American countries to boost their soybean production to fill the gap being left by U.S. farmers.

Biggest declines in Corn Belt
The biggest declines in soybean acreage in 2007 are in the Corn Belt and the Great Plains states, according to the USDA survey. In the South, farmers switched from cotton to corn. Cotton acreage plunged 28% in the U.S. this year.

In the Midwest, here's how the acreage shifts have taken place this year. Illinois is up 17% in planted corn acres in 2007. Indiana is up 20%. Minnesota is up 12%, as is Nebraska. Wisconsin is up 11%, Missouri is up 29%, Ohio is up 27%. On soybean acres, Illinois is down 17%, Indiana is down 19%, Iowa is down 13%, and Minnesota is down 14%. Missouri is down 12%, Ohio is down 14%.

The increase in corn acreage has resulted in approximately the same amount of decrease in soybean acreage in most Midwest states.

Get set for whopper corn crop
Prusacki, who heads the agency in Des Moines that gathers the survey information for Iowa that goes into the USDA reports, says the June planted acreage report was based on a survey of 88,000 farmers nationwide.

"These huge corn acreage numbers signal two things that are going on that farmers and elevator operators are thinking about and need to continue planning for," notes Prusacki. "The trend is to higher corn yields, and we'll have a big harvested acreage. That adds up to a considerably larger harvest."

Corn produces 3 to 4 times as many bushels per acre than soybeans do for many farmers. "This is a signal that we should expect storage issues this fall," he adds. "Where are we going to put all the corn—if a big crop materializes as we expect it could? The pollination period corn is now entering will be very critical in determining just how big this year's corn crop turns out to be at harvest."

More biotech corn acreage planted
The June 29 USDA Planted Acreage Report also shows that farmers have increased their use of genetically modified seeds, including varieties that are toxic to corn pests. In Iowa, 78% of the corn planted in 2007 is genetically engineered, up from 64% last year.

Nationally, the survey shows 73% of corn acres are biotech varieties, up 12% from last year. Biotech soybean varieties are planted on 91% of the soybean acres in the U.S. in 2007. The U.S. cotton acreage is 87% biotech.

TAGS: USDA
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