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Acreage wars

Agriculture.com Staff 01/24/2008 @ 1:15pm

The break in futures prices, the sharp drop in the stock market, and recession fears have distracted farmers and traders from the long running acreage war. This does not mean that the acreage battle is over, as planting is a long ways off.

Recent estimates have a smaller shift in acres between corn and soybeans than many thought this fall. This is good news for corn supply, especially since corn use in the last set of USDA reports was much stronger than previously thought.

But it is bad news for world soybean supplies. Remember both the Brazilian and Argentine crops are forecast is be steady to slightly larger than the previous year. Any increase is not nearly enough to make up for the small US crop grown in 2007. And there is still plenty of weather left to go in the Southern Hemisphere, so crop sizes could change.

Growth in protein demand is one of the large, on-going trends that agriculture faces. Plus improvement in income and diet in many parts of the world means increased demand for cooking oil. Soybeans have the unique position of benefiting from both these trends. Soybean prices need to be high relative to corn, wheat and cotton to encourage planting this season. For South American farmers, the competing crops are the same, plus maybe sugarcane, so high prices are required for long enough to encourage acres down there.

The risk of loss in trading commodities can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial situation.

The break in futures prices, the sharp drop in the stock market, and recession fears have distracted farmers and traders from the long running acreage war. This does not mean that the acreage battle is over, as planting is a long ways off.

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