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Who shifts?

Agriculture.com Staff 11/02/2007 @ 1:41pm

WHO SHIFTS? Volatile price action for agricultural markets will have an impact on a farmer's acreage decisions for 2008.

In the year ahead, we expect farmers to make a shift away from a significant increase in corn acreage in 2007. The question is, however, who does the shifting? After conferring with numerous farmers, we are of the conclusion that for now the majority of the expected shift will come from producers who, on a consistent basis, can grow 45 to 60 bushels per acre beans, but cannot consistently produce more than 175 bushels per acre of corn.

In other words, farmers in states or areas that can quite easily generate 175 or 200 bushels of corn year-in and year-out without much difficulty are likely to stay with a heavier corn rotation. These are the same farmers who, on a consistent basis, cannot seem to generate more than 55 to 60 bushels of soybeans per acre in a good year. The chance of switching 200 bushel per acre of corn to beans on the hope that 60 or 65 bushel bean production occurs is not one that many producers in high-yield corn areas will likely take.

On the other hand, we have talked to numerous farmers who, in the past year, shifted a significant portion of acres to corn because of the economic incentive corn provided last winter. That incentive for 2008 acres does not currently exist. Higher wheat and bean prices along with increased cost to produce corn will also facilitate the shift. Wheat could pull acres from both corn and beans, but the likeliest scenario, especially in the South, is a reduction in corn acres.

Unless the corn market provides a strong economic incentive by midwinter for farmers to stay with a heavy corn rotation, acreage could be reduced 4 to 8 million. In turn, this suggests carryout could be closer to a billion bushels by next year. With tight world inventories and continuously growing demand, either supply rationing or production increases will be needed. Corn prices should be well supported in 2008. Long-term, price dips in the lower $3 area should be viewed as buy opportunities.

If you have any questions or comments, please contact Bryan Doherty at Top Farmer: 1-800-TOP-FARM.

WHO SHIFTS? Volatile price action for agricultural markets will have an impact on a farmer's acreage decisions for 2008.

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