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Big Battle Brewing

March 2, 2011
By: Fran Howard, AgWeb.com Contributing Writer
 
 

One of the fiercest battles ever is taking shape in the nation’s heartland. With corn, soybean and cotton prices at or near record highs, U.S. producers are firing up their spreadsheets and penciling out enterprise budgets to see which crop promises the best returns.

AcreagePieChartUSDA’s Prospective Plantings report due out March 31 will likely be the most closely watched report of the year. "Corn and soybeans could gain acres from other crops, but the biggest gain in acres will be from land coming back into production," explains Chad Hart, Iowa State University ag economist.

In 2008, the year corn prices soared to record highs, U.S. farmers planted 20 major crops on 325 million acres. By 2010, producers had taken 8 million acres out of production, planting 317 million acres to the major crops. Much of the fallowed land was marginal, with lower yield potential.

"However, $6 corn and $13 to $14 soybeans provide really hot incentives to plant as much of that land as possible," Hart says.

The Conservation Reserve Program (CRP) could provide some acres, but not enough to meet world demand. "We won’t find a lot of land out of CRP, maybe 100,000 to 200,000 acres," says Frayne Olson, ag economist with North Dakota State University (NDSU).

High Cotton. This year, record-high cotton prices will be fighting with corn and soybean prices for additional acres, but some producers don’t have the flexibility to switch.

Soaring corn prices and low cotton prices enticed numerous cotton producers in Mississippi, Louisiana and Arkansas to shift away from cotton to corn.

"Cotton prices are once again competitive," Hart says. But a lot of those cotton producers sold their machinery in 2007 and may not be willing to repurchase equipment. In 2007, cotton prices were about half of what they are today at more than $1 per pound.

"If the price remains close to $1 or above, it will likely attract additional cotton acres from corn and soybeans," says Carl Anderson, ag economist with Texas A&M University. "I expect a 15%
increase from 2010 in cotton acres."

To achieve a 15% increase, producers would have to plant a total of 12.65 million acres to cotton, or 1.65 million acres more than this past year. Anderson expects Texas, Alabama, North Carolina and South Carolina to increase cotton acreage.

By now, however, producers have already committed the majority of farmland to one crop or another. As for shifting between corn and soybeans, many producers using the rotation system will continue to rotate on schedule. "You can pencil out a nice profit to put corn on last year’s soybeans," notes North Dakota’s Olson. But others could plant corn on last year’s corn fields.

"There’s enough uncertainty about the South American crop that I don’t think we’ll see a huge shift of soybean land into corn," Olson says. That uncertainty is expected to support soybean prices into Brazil and Argentina’s harvest season, which coincides with the early part of the U.S. planting season.

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FEATURED IN: Top Producer - March 2011
RELATED TOPICS: Marketing, Crops, USDA, Economy

 
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