A 45% rally in soybean prices in 11 months was not enough to convince South Dakota farmer DuWayne Bosse to give up any corn acreage on his farm this spring.
"For our farm, we are looking at maxing out corn acres," said Bosse, who added that soybean futures 0#S: for the next crop would have to rally another 9% to $13.25 a bushel to make switching up his seeding plans worthwhile.
"The price has to move pretty drastically for us to unhook the corn planters," he said.
Even though soybean prices have risen more than corn, which gained 24.7% in the same 11 months, farmers are increasingly opting for the yellow grain in the weeks before planting. Their reasoning includes the importance of crop rotations to maintain long-term soil health, strong export demand and an improved outlook for corn-based biofuel.
Analysts expect farmers to plant record combined soy and corn acreage in a closely watched crop cycle as prices for their top two cash crops are the highest in years. Some have increased their corn acreage estimates and cut forecasts for soybean acres ahead of the government’s first planting forecast based on farmer surveys.
A Reuters poll forecasts the Wednesday report would show that farmers planned to seed 93.208m acres (37.72m hectares) of corn and 89.996m acres (36.42m hectares) of soybeans.
Darin Anderson, who farms about 3,700 acres near Valley City North Dakota, plans to cut back soybean plantings by 16% to 1,600 acres and boost corn acres by 25% to as much as 1,250.
Heavy spring rains limited his ability to seed corn the past two years, and he hopes to prioritize corn this year. Soybeans can be planted later in the year than corn, so if rain delays planting, many farmers end up switching to soybeans. Planting the same crop over and over can reduce productivity in the field.
Due to the futures strength, crop insurance policies for 2021 were set with their highest price guarantees in seven years for corn and the highest in eight years for soybeans. The price ratio, reflecting soybeans price premium to corn, stood at 2.59, the highest since 1989.
But farmers factor in a lot more than crop insurance when laying out their acreage plans, Anderson said.
"It is not as simple as just saying ’the soybean to corn ratio is 2.6, well I guess we will plant beans,’" he said. "There are a lot of variables that go into it."
Adverse weather in Brazil could further limit corn production from that key export competitor and boost demand for US corn. Demand for corn-based ethanol in the United States is expected to increase as drivers return to roads after Covid-19-related shutdowns, which would lend further support to prices.
A string of corn purchases from top buyer China just ahead of planting season helped solidify growers’ intentions on betting big on corn, though a Chinese plan to cut the amount of corn and soy used in animal feed could be a threat if Beijing is successful in finding alternatives quickly.
’MAKE MORE MONEY’
Farmers favoring corn over soybeans may further erode already low inventories of the oilseed. US soybean stocks are expected to drop to their lowest in seven years, with a record low nine-and-a half days of supplies forecast to be left in storage bins by the time harvest begins in autumn.
The Biden administration’s green fuel push has increased demand for vegetable oils, meaning exporters and US soybean crushers are competing for dwindling soybean supplies.
Corn stocks are also forecast to fall to an eight-year low by harvest.
The price strength in both crops and the crop insurance guarantees give farmers the confidence to boost their bets on corn, even though corn is more costly to grow due to higher input costs for fertilizer and fuel. Corn also has more potential upside in terms of yield.
"Yields are probably just a little bit more variable than soybeans. You will make more money if you have exceptional corn yields," agricultural economist Brent Gloy said.
US farmers have only ever planted more acres with soybeans than corn twice – most recently in 2018 when the government heavily subsidized soybean planting during the US-China trade war.
Illinois farmer Mike Homerding, who plans to divide his 3,600 acres evenly between corn and soybeans, said that experience in his fields have taught him that the extra cost related to raising corn is well worth it.
"I like growing corn," said Homerding. "Even a bushel, or a bushel and a half increase in yield pays for it."