In mid-December independent acreage forecasts for this coming spring started to be released. Many of the forecasts were pegging corn around 82 million acres and soybeans near 80 million acres. That compares to this past year's corn acres at 85.9 million and soybeans at 75.9 million.
The key question: Could there be that big a shift with a sharp drop in corn acres and a sharp increase in soybean acres? In my opinion × not very likely.
The table shows what could happen if corn acres actually did get planted around 82 million (our low-end estimate is 82.5 million). The results in carryover supplies would be so extreme in both cases that such a scenario has extremely low odds of ever happening.
FOR EXAMPLE, if U.S. farmers did plant only 82.5 million acres of corn with a yield similar to this year, the result in carryover would be under 500 million bushels. That would easily push corn prices back into the high $5 range and possibly the low $6 range.
If there is any indication of an 82.5-million acreage number likely occurring before planting takes place, the market will take care of itself by already having a high price. That would thus encourage more acres, which would mean planting more than 82.5 million acres.
The same is true in soybeans. If prior to planting an estimate of 79 million acres appears likely, then soybean prices would be so low before planting that such a scenario would again not likely occur.
A KEY CHANGE
The problem as I see it with all of the early acreage estimates is that farmers were surveyed when fertilizer prices were still sky high, but have since collapsed. Some producers are undoubtedly going to be influenced by the high dollar amount to put out a corn crop this coming spring vs. soybeans, and may even receive some encouragement from their lenders to do the same.
But the profit potential for a Midwestern farmer comparing corn to soybeans, in my opinion, will still favor corn as we get ready to plant. If not, by mid-summer if any weather problems materialize, we're then facing another significant bull market in corn.
In the meantime, the prices of both commodities will likely stay well off of the December lows and move back into profitable levels to encourage this coming spring's planting. For now, we're sticking with an estimate of 87.5 million acres on corn and 77 million acres on beans.
Richard Brock is president of Brock Associates, a farm market advisory firm, and publisher of The Brock Report. For a trial subscription and information on Brock services, call 800-558-3431 or visit www.brockreport.com.