March 31, 2004
Economist: Soybean stock surprise could shake planting plans
WEST LAFAYETTE, Ind. - An annual U.S. Department of Agriculture report indicates farmers are prepared to increase their soybean acreage this spring while planting about the same acres of corn as in 2003. A companion USDA report might convince them otherwise, said Chris Hurt, a Purdue University agricultural economist.
Today's (Wednesday, 3/31) USDA Prospective Plantings Report projected a 3 percent increase in national soybean acreage, to a record 75.4 million acres. National corn acreage is expected to inch up to 79 million acres.
Those numbers could change, based on a USDA grain stocks report, also issued today. That report revealed soybean stocks aren't as tight as previously believed. The USDA estimated that there are about 40 million bushels more soybeans than had been anticipated. The news should bring soybean prices down and encourage farmers to grow more corn this year, Hurt said.
"The recognition that there may be 40 million bushels more of old-crop soybeans tells us producers need to be given an incentive to plant a bit more corn in the United States in 2004," he said. "I think what we'll see is new-crop soybean prices decreasing relative to new-crop corn, which will convince a few more farmers that we need more corn acreage. The bean acreage is not going to be quite as critical as what we thought."
Soybean prices already are beginning to come down. Prices that had been at or above $10 a bushel before the grain stocks report fell 25 cents a bushel in the first hours of trading today. Conversely, new-crop corn prices that were hovering around $3 a bushel rose 10 cents early today, boosting per-acre returns on average cropland by $14, Hurt said.
Hurt predicted soybean prices could tumble even more in the near term, as producers with old-crop beans rush to sell.
"We could see a bearish market for soybeans in the short run, although the bearishness will be tempered by the still-unresolved issues of just how much users must cut back this summer," he said.
The USDA placed quarterly soybean stocks at 906 million bushels. Although the estimate is about 40 million bushels larger than the previous projection, stocks are still 25 percent lower than one year ago.
The planting intentions report, based on farmer surveys, indicated that Indiana farmers expect to make no changes in their corn or soybean acreage from 2003. The USDA said Hoosier producers will plant 5.6 million acres of corn and 5.45 million acres of soybeans this spring.
In Ohio, farmers are projected to increase corn planting by 100,000 acres, to 3.4 million acres. Soybean acreage is expected to reach 4.35 million acres, up 50,000 acres, according to the USDA.
High recent soybean prices motivated farmers to tell USDA they'll plant more soybeans this spring, Hurt said. Another factor restricting corn intentions is rising fuel and nitrogen fertilizer prices, which increase anticipated corn costs more than soybeans.
The grain stocks report, along with the forecast of lower soybean prices, should cause farmers to consider more corn acres. Some might be able to shift some acres back to corn, but many will not, Hurt said.
"We're right on the verge of the planting season, so many producers are locked in, in terms of fertilizer purchases, seed purchases, etcetera," he said. "So at the margin there will be some ability to adjust, but it's not going to be very large.
"If the planting intentions numbers are a bit out of line, there can still be some adjustment made. We don't have to see a lot of adjustment, but we probably need to shift a half million or a million acres over to corn from soybeans in the United States. The market price will try to provide the incentive to do that over the next few days and weeks."
Writer: Steve Leer, (765) 494-8415, firstname.lastname@example.org
Source: Chris Hurt, (765) 494-4273, email@example.com
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