Acreage Game of Chicken

February 18, 2009 06:00 PM
 

Greg Vincent, Top Producer Editor
 
The much ballyhooed acreage battle of 2009 may be a game of chicken. High fertilizer prices and tanking commodity prices are on a head-on collision course and farmers are stuck in the middle because something has to be planted soon. It just seems nobody wants to plant much of anything when weighing all the factors together.
 
For now, indications are there will be more soybeans in 2009, but a survey of Top Producer readers from late January to early February shows more than 60% of the respondents still have not decided on their final mix of corn and soybeans for 2009. The number waiting until this month or later to make that final decision is 54%, with nearly 30% saying they won't make that determination until they are ready to pull into the field.
 
Crop rotation remains the number one factor determining acreage, but close behind are commodity prices and continued high fertilizer prices, according to the survey. This makes sense, says Jerry Gulke, president of Strategic Marketing Services and Top Producer Market Strategy columnist. States that have seen significantly more corn acres the past two years are likely turning this tide.
 
"Anyone that doesn't get at least160 to 170 bu. of corn struggles with being able to make it cash flow,” Gulke says. "What I've found in looking at this survey, as well as speaking at seminars, is that the fringe of the corn states—in other words the non-I states of Iowa, Illinois and Indiana, and of course Minnesota—are probably going to shift to soybeans because they can't grow 200-bu. corn. I was recently in North Dakota and they're concerned about getting into the field in the Red River Valley. So already, they've made commitments to look at maybe a 20% switch there.”
 
Despite crop rotation factors, Gulke believes fertilizer purchases are mostly to blame. If falling wholesale prices spill over to the retail market, corn may make some acreage gains. "They're saying, ‘I've paid a lot of money for fertilizer before, I probably don't want to do that on the rest of my crop,'” says Gulke. "So if fertilizer were to drop precipitously in the next month or so, that might change somewhat.”
 
The delayed decisions mean you probably shouldn't put too much stock into USDA's Planting Intentions Report, due for release on March 31, he says. "Spring weather is going to be important because in northern Illinois we have a lot of field work to do, and so do a lot of other people. There's was little fertilizer put down in my area. Very few people did anything last fall. So, will we be able to get it all done in time? And that's the weather again. I think we probably won't know regarding US acreage mix for sure until June 30, because there could easily be a 5% difference between what we intend to do on March 1 and what we end up doing. That's 4 million acres of corn that could swing either way. It's going to be a crapshoot all the way through.”
 
Corn acres will suffer at the hands of soybeans, but the biggest percentage of lost acreage will be wheat, Gulke believes. However, he thinks there is room for corn to give up substantial acreage with little market impact. The expected decrease in corn ethanol production, coupled with fewer cattle and hogs being fed, means corn could easily sacrifice as many as two million acres.
 
 
For More Information
 

 
You can e-mail Greg Vincent at gvincent@farmjournal.com.
 
 

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