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What's in your planter?

Agriculture.com Staff 02/25/2009 @ 9:28am

USDA's annual conclave in Washington, DC, this week provided analysts a first glimpse of what they expect for plantings in the 2009 crop year. Although mostly 'guest-imates' at this stage of the game, they are nonetheless a bit surprising. USDA looks for higher corn acres in 2009 (88.0 million acres projected versus 85.9 in 2008) and lower soybean acres (74.0 million acres projected versus 75.9 in 2008).

While farmers will be heavily weighing prices this year as they compare new-crop corn and soybean prices, costs will also play an important consideration. The University of Illinois reports that 2009 corn and soybean production costs will be up about 45% over last year. So, if you factor in higher costs and lower prices, where do farmers stand in the war between corn and soybean acres in 2009?

To answer this question, we compiled new-crop forward contract prices from over 3,400 grain buyers around the country based on prices available February 23, 2009. While futures prices are a good overall national driver, to understand variations at the local level it helps to use exact prices -- what are farmers currently facing in their local market which accounts for basis at different locations. Combining forward contract prices with 2009 expected yields by state (trend line yields) and estimates for 2009 production costs, we computed the net-returns per acre and made a comparison of corn versus soybeans.

The map below gives the relative profitability of soybeans versus corn. Areas in green show where soybeans outperform corn by $30 acre on net while areas in red (very limited areas) show corn outperforming soybeans by $30 on net. The yellow areas are in between, making it somewhat of a toss-up whether corn or beans is better.

Key Midwest states like Iowa, Illinois and Minnesota may be a bit on the fence. Profitability of corn versus soybeans is fairly comparable in these locales. However, once you venture outside of these areas, the rewards to soybeans more clearly dominate corn.

How does this compare to 2008? Utilizing the same techniques -- taking costs for 2008, forward prices offered in late February of 2008, and utilizing trend yields for 2008 -- the map below paints the picture of what farmers faced at this time last year. The economics clearly favored corn more so then soybeans last year at this time as indicated by the large areas in red.

So, will we see a huge switch to soybeans over corn in 2009? Probably not. History dictates that planting season weather and rotational considerations can have just as much to do with crop choices as planting season economics. However, the scale is certainly tipped towards beans, even as new-crop soybean futures have been sliding lower.

USDA's annual conclave in Washington, DC, this week provided analysts a first glimpse of what they expect for plantings in the 2009 crop year. Although mostly 'guest-imates' at this stage of the game, they are nonetheless a bit surprising. USDA looks for higher corn acres in 2009 (88.0 million acres projected versus 85.9 in 2008) and lower soybean acres (74.0 million acres projected versus 75.9 in 2008).

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