The tug-of-war for acres between corn and soybeans appears to be shifting back to beans in 2008. The price premium corn enjoyed in 2007 has diminished some, and runaway fertilizer prices have growers nervous about corn's appetite for nitrogen.
With corn peaking above $5/bu. and soybeans topping $12/bu. there's profit in both crops. But, the prospect of $700/ton anhydrous ammonia has some growers backing off their corn acres. It's also encouraging growers to bring crop rotations closer to their normal cycles and planting beans to reduce their input costs.
Industry insiders predict that soybean acreage will reach nearly 71 million acres in 2008, a more than 7-million-acre increase compared to 2007, but still short of the 75.5 million acres planted to soybeans in 2006. Most of the acre increase will come from land planted to corn in 2007. Experts estimate corn acres will end up around 88 million in 2008, compared with 93.6 million in 2007. But wheat and cotton will lose acres to soybeans in 2008, as well.
In a mid-January online survey of Corn & Soybean Digest subscribers, nearly 85% of the growers said their soybean acreage in 2008 would equal or exceed their 2007 acres. The nationwide survey showed 23.5% of those increasing their acres intend to increase acres by up to 10%; 13.5% of these intend to increase soybean acres by more than 50%.
Lakefield, MN, farmer David Henning and his son Matt plan to plant 100% soybeans on their 1,700-acre farm operation in 2008, reversing six years of planting nearly all corn. Dry summers, wet falls and high-dollar fertilizer costs drove their decision.
“I actually decided to go all beans last October while we were still harvesting,” he says. “It was an extremely wet fall that resulted in a lot of ruts and compaction. I knew it would be difficult to grow a high-yield corn crop under those conditions in 2008.”
The energy market helped with the decision. “This energy thing is crazy. And it takes a lot more energy to grow corn than soybeans. It isn't nearly as much fun hauling corn to town when you refill with $3.50 diesel on the way back to the field,” he says. “The corn came out of the fields dry this year, but that doesn't happen every year. Can you imagine drying several hundred thousand bushels of corn if propane costs $2.50/gal.?”
And then there's the weather factor. “In 2006 we went six weeks without rain during the growing season. Then in 2007 we went eight weeks without rain,” Henning says. “These hybrids are good, but they're not that good. Then you look at $700 anhydrous ammonia and I'm a lot more comfortable raising soybeans this year.”
You'll likely see a lot of soybeans grown as a risk-management hedge against dry weather in the Dakotas, eastern Nebraska and western Iowa, according to Mark Frank, Elkhorn, NE-based risk-management consultant for Russell Consulting Group, Panora, IA. “From the conversations I'm having with clients, a lot of beans are going to get planted, particularly on dryland acres where there's too much risk to justify what it's going to cost to grow corn this year,” he says.
“Guys really prefer a corn-soybean rotation. And, while corn still has a price advantage over soybeans, the profit opportunity in beans is high enough to encourage them back to their rotations,” he says.
Just like in Minnesota, fertilizer prices have Frank's clients on edge. “Some guys are wishing they could prepay for fertilizer now for their next two years' production,” he says. “They don't want to sell any 2009 or 2010 corn if they can't lock up fertilizer prices.
“Fertilizer costs for corn are around $120/acre, up 45% in 2008 compared with 2007,” he says. “If we see that same increase in 2009 it means another $54/acre — just for fertilizer. In 2008, we're looking at breakevens of $3-3.50 on corn, $8-9 on beans.”
Adds Moe Russell, Russell Consulting Group: “We've got one client who will pay as much to grow 3,600 acres of corn in 2008 as he did to grow 5,600 acres in 2007. His costs have nearly doubled in just two years.”
WITH STRONG MONEY in both corn and soybeans, Russell suggests the biggest decision farmers face is how to control their emotions. “There's just a lot of anxiety out there right now,” he says. “Instead of jumping up and down about selling corn for $4/bu., they're disgusted they didn't wait and sell for $5/bu. That's revealing to me.”
Russell suggests your corn-bean decision be based on three factors. “There's not an overwhelming argument for either corn or soybeans,” he says. “So first, look at the cost and availability of fertilizer, followed by profit potential per acre and lastly the capital it takes to grow the crop.” And, he adds, when you make your cropping decision, lock in your margins. “Nobody says these commodity prices are going to stay.”
Minnesota's Henning intends to use 2008 as a year to reflect on how he wants to run his business in the uncertain, high-priced environment that farming has become. “It's a time to stand back and look for ways to protect our business and not expose us to too much risk,” he says. “It's a whirlwind right now. I figure I've got a year to look back, reflect and then create new objectives for how we operate our farm.”