Feb. 21 (Bloomberg) -- From South Dakota to Ohio, farmers are preparing to plant the most corn in almost eight decades after drought ruined record U.S. harvests predicted by the government.
"Farmers are looking for every acre possible to plant this year," said Bill Bayliss, 67, who is expanding acreage by 10 percent on land he farms in West Mansfield, Ohio, where drought conditions have disappeared. "The price is attractive, and we have seen an improvement in soil moisture."
Corn acreage in the U.S., the world’s top grower and exporter, will be the largest since 1936, yielding an all-time high of 13.863 billion bushels at harvest should weather conditions improve, the average of 17 analysts’ estimates in a Bloomberg survey shows. The U.S. Department of Agriculture, in a report today, predicted output will jump 34 percent to a record 14.53 billion. Futures contracts show traders expect corn prices to fall 19 percent by December to $5.585 as supply grows after the harvest, cutting costs for livestock producers and ethanol distillers.
While adverse weather the past three years prompted the USDA to back off predictions made in May before planting started, corn prices that are higher than 2012’s record average mean the crop remains profitable for farmers. The grain traded at $6.94 in Chicago today.
"We are in a major transition to a more-abundant supply situation," said Don Roose, president of U.S. Commodities Inc. in West Des Moines, Iowa, who grows corn and soybeans on his farm. "We have sent a clear price signal to the rest of the world to produce more corn." Prices may drop below $4 a bushel in Chicago this year, he said.
Corn futures that reached a record $8.49 in September have fallen 6.4 percent this month on the Chicago Board of Trade. The Standard & Poor’s GSCI Spot Index of 24 commodities is down 2.1 percent, while the MSCI World Index of shares fell 0.7 percent. Treasuries lost 0.05 percent, a Bank of America index shows.
Farmers have the capital needed to boost production of corn, the biggest domestic crop valued at a record $77.35 billion in 2012, as the financial condition of U.S. agriculture has never been better, government and Federal Reserve data show.
Farm income will jump to a record $128.2 billion this year, Midwest cropland values are the highest ever and the ratio of debt to equity is the lowest on record at 11.3 percent, according to the USDA. While the worst drought since the 1930s cut output by 13 percent last year, farmers were protected from losses by crop-insurance payouts that reached an all-time high of $14.7 billion, with more claims expected.
Planting from March to June will reach 97.73 million acres, up from a 75-year high of 97.155 million in 2012, according to the Bloomberg survey. The USDA forecast a 0.7 percent drop to 96.5 million acres. While the drought cut output 13 percent to 10.78 billion bushels last year, improved weather and better yields in 2013 will help boost stockpiles before the 2014 harvest to 1.795 billion bushels, the most since 2006 and up from a 17-year low of 632 million this year, according to the survey.