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Soy Switch on U.S. Corn Farms Expanding World Glut

February 12, 2014
corn soybean
  

Corn is no longer king on Todd Wachtel’s 5,500-acre farm in Illinois. After prices fell to a three-year low in January, he will cut planting by 20 percent in 2014 and devote half his land to soybeans, which are cheaper to grow and just as profitable for the first time in four years.

Across the Corn Belt, growing the biggest U.S. crop had been an easy choice for farmers since 2009. Annual revenue was $150 per acre more than soybeans on average for Wachtel, who sowed 3,450 acres of corn in 2013, or 63 percent of his land. This year, lower prices mean both crops will earn $10 to $20 an acre, so Wachtel is reducing his risk by sowing more soybeans, which cost $220 less per acre to grow than corn.

"You are putting less money at risk for the same profit," Wachtel, 42, said by telephone from Altamont, about 220 miles (354 kilometers) south of Chicago.

Farmers in the U.S., the world’s second-largest soybean grower, will boost planting by 5 percent to a record 80.391 million acres, a Bloomberg survey of 22 analysts showed. With the biggest crops ever being harvested now in Argentina and Brazil, the top producer and exporter, Goldman Sachs Group Inc. and Jefferies Bache LLC predicted last month that prices will slump 29 percent to $9.50 a bushel in Chicago within a year.

Soybean futures on the Chicago Board of Trade are down 5.7 percent in the past 12 months to $13.295. Corn tumbled 37 percent over the same period, the biggest drop among 24 commodities tracked by the Standard & Poor’s GSCI Spot Index, which slid 6 percent. The MSCI All-Country World Index of equities is up 13 percent in the past year, while the Bloomberg U.S. Treasury Bond Index fell 1.2 percent.

 

Cheaper Food 

Cheaper soybeans, used to make animal feed, cooking oil and biodiesel, will boost profit margins for processors including Archer-Daniels-Midland Co. Oil World, a Hamburg-based researcher, said record supplies of vegetable oil will help reduce global food costs that already are down 15 percent from a record in February 2011. A United Nations gauge of food oils has dropped 35 percent over the same period.

The U.S. Department of Agriculture will make its first 2014 planting forecasts tomorrow as part of its 10-year agricultural projections, which are based on conditions in November. A more updated forecast will be issued Feb. 20 at the USDA’s annual outlook forum, and the agency will conduct a national survey of growers next month that will be released March 31.

 

Rising Output

Global production in the year that began Oct. 1 will rise 7.2 percent to an all-time high of 287.7 million metric tons from a year earlier, led by record harvests in Brazil, Canada, Uruguay and Ukraine, the USDA said Feb. 10. Brazil supplanted the U.S. as the top exporter last year and will be the biggest grower in 2014. Argentina, the largest shipper of soy-based animal feed and cooking oil, will have its second-biggest harvest ever.

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