Who will win?
Some say corn is king, but soybeans and wheat -- typically considered as a largely rotational crop and the "stepchild of the grain commodities," respectively -- are gathering momentum toward what could shape up as a battle for U.S. acres in the coming year.
But, even though the fight may start between wheat and soybeans, don't count out a comeback by corn in the end, analysts and farmers say.
On Friday, USDA pegged this year's U.S. corn production at 13.2 billion bushels, a 25% jump from 2006. Conversely, the agency's soybean number -- 2.59 billion bushels -- is 19% down from last year, when the current soybean production record was set. Neither number was a surprise to market-watchers and, in fact, fell dead-on with trade estimates earlier in the week.
Friday's USDA Crop Production report -- the same one that, last year at this time, set into motion a bullish swing in the corn market -- does foreshadow the need for an acreage shift in 2008. But, which crop will see the greatest shift next year?
Just weeks ago, it seemed wheat may be poised to see the largest bump in acres, but analysts said this week that some key signs may indicate the tide is turning toward more beans. But, don't forget about corn.
"Prospects for a sharp decline in U.S. soybean stocks by the end of the 2007-08 marketing year suggest that an increase in U.S. soybean production, and therefore acreage, will be required in 2008," University of Illinois Extension economist Darrel Good said this week.
But, Good added that current soybean futures prices alone could be enough to drive a bump in bean acres. Even so, prices at current levels mean corn is still the highest bidder, profit-wise.
"There does appear to be a bit of a knee-jerk reaction by producers to plan for more soybean acreage in 2008 with November 2008 futures above $9.50," he said. "However, December corn futures at $4.25 suggest that corn is still potentially more profitable than soybeans in much of the Midwest."
After dry conditions hampered early planting conditions in South America weeks ago, moisture has caught up there, and so too has the progress of and outlook for the region's soybean crop. This, according to Peter Georgantones, owner of Investment Trading Services in Bloomington, Minnesota, is reason alone for the U.S. bean market to support acreage expansion in '08.
"The bean market's going to have to do its part to make sure we increase acres here," Georgantones said Friday. "South America is off to a really good start. They've gotten good rains down there. We have to plant many more acres to soybeans."
Whether or not U.S. farmers keep up with South America in terms of soybean production, Good says, won't be known until harvest begins in the southern hemisphere. Until then, U.S. farmers -- regardless of what they may have already planted -- can and will adapt to market signals once a clearer picture of South American production is painted.
"Forecasts of the acreage response in the U.S. before the outcome of the 2008 South American crop is more clear cannot be very accurate," he says. "While some production decisions have already been made, producers clearly demonstrated the ability for late-season acreage flexibility in 2007 when planted acreage of soybeans was nearly 3.5 million less than intentions reported in March."