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Shift to beans hurting profitability

Agriculture.com Staff 04/03/2006 @ 2:40pm

It appears that the markets made a mistake by encouraging a planned shift from corn to soybean acreage in the United States in 2006, particularly the magnitude of the shift currently planned, said a University of Illinois Extension marketing specialist.

"The market must now try to quickly remedy that mistake by encouraging producers to moderate the shift," said Darrel Good. "Prices certainly moved in that direction after the USDA's Prospective Plantings report was issued.

"At an average yield of 40 bushels for soybeans and 150 bushels for corn, the market on March 31 reduced the potential profitability of soybeans relative to corn by nearly $17 per acre. It appears that prices may need to continue to change in favor of corn over soybeans. In addition, if 2006 yields are near trend value, deferred futures prices are still overvalued by a considerable amount for both crops."

Good's comments came as he reviewed the USDA report, which provided more than the usual number of surprises. Producers reported intentions to shift significant acreage from corn to soybeans and to sharply reduce acreage of durum wheat.

Producers reported intentions to plant only 78.019 million acres of corn in 2006, 3.74 million less than planted in 2005. The decline is about 2.5 million acres more than the average pre-report guess.

"Those intentions are widespread geographically, with the exception of Minnesota and North Dakota, where intentions are unchanged and up 240,000 acres, respectively," said Good. The largest decline, 700,000 acres, is planned in Illinois. The large decline there reflects the combined increase in winter wheat seedings and intentions to increase soybean acreage."

Intentions for planting of all feed grains included in the March report (corn, sorghum, barley, and oats) totaled 92.493 million acres, 3.841 million less than the area planted in 2005. Barley acreage is scheduled to decline by 208,000 (5.4 percent) while oat seedings are expected to increase by 78,000 (1.8 percent).

For soybeans, producers reported intentions to plant a record 76.895 million acres in 2006, 4.753 million more than planted in 2005 and 2.675 million more than the average pre-report guess.

"The planned increase spans all producing regions except the Southeast, where intentions are 71,000 acres--3.1 percent--below actual plantings in 2005," said Good. "The largest planted increase is 1.2 million acres in North Dakota. Illinois, at 600,000 acres, is second followed by Indiana at 500,000 acres."

Intentions for all oilseeds included in the March report (canola, flaxseed, peanuts, soybeans, and sunflower) totaled 82.295 million acres, 3.645 million more than planted in 2005. Plans are to reduce acreage of each of the crops other than soybeans.

Planted acreage of winter wheat and intentions for spring wheat total 57.128 million acres, 101,000 fewer acres than seeded last year. Winter wheat seedings are up by 971,000 acres (2.4 percent) while intentions for durum wheat are down 935,000 acres (33.9 percent) and intentions for other spring wheat are down 137,000 acres (1 percent). North Dakota producers plan to reduce acreage of all spring wheat by 1.08 million acres (12.3 percent).

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