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Can We Do It?

March 8, 2011
By: Jeanne Bernick, Top Producer Editor
 
 

William Lapp has run the numbers. The economist can’t seem to figure out how farmers will meet demand unless they bump up corn acres.

"When I add up the states, I can’t get much over 90 million acres during 2011 to meet growth in demand," says Lapp, president of Advanced Economic Solutions LLC in Omaha, Neb., and former chief economist for ConAgra Foods.

U.S. farmers will need to plant 92 million acres to accommodate demand, Lapp and others believe. Plus, the need will increase to upward of 95 million acres in the next couple of years.

U.S. farmers grew 93 million acres of corn in 2007, but less than 70 million acres of soybeans. "It’s a much different situation now," Lapp says. "We’ve got a serious problem with availability of acreage for corn in the coming year."

USDA’s December Supply and Demand report showed continued tight supplies for corn and soybeans, which Texas A&M University marketing economist Mark Welch says will help drive planting decisions next year. Grain stocks weren’t reduced as much as expected, with USDA only making minor adjustments to the corn, wheat and soybean balance sheets.

The USDA report indicates supplies of the two crops will be tight headed into the new year, pointing to strong demand and the need for increased acres in 2011, giving support to corn prices, Welch adds.

Informa Economics’ December release of its 2011 acreage predictions also showed lower acres. "Informa did an about-face from what they did in November and gave the bulls a little more room to buy corn," says Jerry Gulke, president of the Gulke Group. "They lowered their corn acres down to 90.8 million acres, which is closer to what most of us thought was reasonable anyway."

corn acreage riseAnyone’s Guess. "Obviously we are going to see an acreage battle," seconds Richard Brock, president of Brock Associates ag commodity advisory firm. "But we have another part of the equation on soybeans, and that is what will happen with the soybean crop in Brazil and Argentina this winter."

While the possibility of 90 million acres is positive, there are no guarantees on what farmers will actually produce, given unknown weather conditions. "The prognosis is we’re going to have a strong market," Lapp says. "It would be difficult for me to develop a scenario where between now and April 1 that corn prices will trade for under $5. The caveat I’ll throw up is what happens with China."

Right now the driving force in the soybean market is China, Brock explains. "They are stockpiling beans, and the question is when are they going to stop stockpiling," he says.

When that happens, the bull market is going to stop, Brock adds. "China’s not going to back out, but they can’t stockpile more than a certain point of their needs. They aren’t building more processing." –-Rhonda Brooks contributed to this story

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FEATURED IN: Top Producer - January 2011
RELATED TOPICS: Marketing, Crops, USDA, Land, Production

 
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