Beans, Beans, And More Beans

When USDA picked your brain at the first of March about 2008 planting intentions, you were thinking you would probably plant more soybeans. Prices were about two and a half times the price of corn, and as a matter of fact you could not remember when soybean prices were that high. Beans, beans and more beans all came to fruition Monday.

11.162 million acres more beans than 2007 popped up in the Prospective Plantings Report issued by USDA. That was an 18% increase in soybean acreage, all the while 2008 expected corn acreage dropped by 8% from last year, representing 7.586 million fewer acres. Both estimates shifted more than the market expected.

The USDA report indicated there will be a strong demand for the corn being produced this year. “Expected acreage is down from last year in most states as favorable prices for other crops, high input costs for corn, and crop rotation considerations are motivating some farmers to plant fewer acres to corn. Despite the decrease, corn acreage is expected to remain at historically high levels as the corn price outlook remains strong due in part to the continued expansion in ethanol production.”

University of Illinois Marketing Specialist Darrel Good said corn acreage will be down one million acres in Iowa, 800,000 in Indiana, and 600,000 acres in Illinois. Based on a 78 million acre harvest and a 155 bu optimistic yield, production would slightly exceed 12 billion bushels in 2008. He says 2008 consumption will be 750 million bushels more than that, and 2009 use will surely increase.

In his recent newsletter, Good says we won’t have enough corn to satisfy all of the demand if the planting intentions come to fruition, “It appears that intended acreage of corn is not sufficient to supply the projected rate of consumption and implies that corn prices will have to increase to slow consumption and/or producers will have to plant more acreage than intended.” But right now, the intentions are to plant less across the Cornbelt, says USDA, “Corn farmers in the 10 major corn producing States (Illinois, Indiana, Iowa, Kansas, Minnesota, Missouri, Nebraska, Ohio, South Dakota, and Wisconsin) intend to plant 66.6 million acres, down 8 percent from the 72.0 million acres planted last year.”

The huge addition of soybean acres and reduction of corn acres was also of concern to University of Missouri Marketing Specialist Melvin Brees, who says in his newsletter the situation could still get worse, “These reports suggest negative news for soybean prices and, although expected corn acreage is still relatively large, they raise concerns about whether corn supplies will be adequate to sustain growing demand. Increasing input costs, production risks and marketing risks, along with high soybean prices, have evidently influenced the acreage shift away from corn. While the actual planted acreage often changes from the early March planting intentions, the possibility of wet weather delays may limit producer opportunities to add to corn acreage.”

The high market prices for soybeans enticed thousands of producers to plant more beans this year, and they responded with intentions to plant 74.793 million acres. Just like the widespread decision to plant less corn, there were similar thoughts in all states about the need to plant more beans, says USDA, “The largest increases are expected in Iowa and Nebraska, up 1.25 million acres and 1.20 million acres from 2007, respectively. Increases of at least 800,000 acres are also expected in Indiana, Minnesota, and South Dakota. If realized, the planted acreage in Kansas, New York, and Pennsylvania will be the largest on record. Growers in the 11 major soybean producing States (Arkansas, Illinois, Indiana, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Ohio, and South Dakota) intend to plant 60.0 million acres, up 16 percent from last year.”

At the University of Illinois, Extensions’ Darrel Good says soybean supplies should be able to meet the demand, “If 74.8 million acres are planted, harvested acreage might be near 73.8 million. With a national average yield near 42.5 bushels, the 2008 crop would total about 3.14 billion bushels, 115 million more than the level of consumption expected during the current marketing year. Current price relationships suggest that actual planted acreage of soybeans in 2008 should fall short of intentions.”

Since the survey was taken by USDA in early March, the bean market has lost $3 and the report was met with a 70 cent limit down move on Monday. Continued weakness in the bean market may turn some acres back to corn by the time planting time rolls around.

Summary:
It was anticipated that more soybean acres will be planted this year, as a result of high soybean prices over the winter, however, USDA forecast planting intentions 18% more than last year for beans, and 8% fewer corn acres than last year. Both exceeded market expectations. If realized, corn production may not meet expected consumption in the coming year, and soybean production will be barely enough. However, prices of corn and soybeans could change as a result of the report and the acreage change may not be actually as radical as forecast.