Corn Holds Strong in Acre Shuffle

Corn Holds Strong in Acre Shuffle

After months of speculation of the 2015 acreage mix, USDA released its first survey-based estimate, the annual Prospective Plantings report.

With a wide range of estimates for corn and soybeans ahead of the report, Jerry Gulke, president of The Gulke Group, knew there would be some surprises.

“The biggest surprise to me was that we didn’t lower the corn acres as much as we thought,” Gulke says.

Here’s a report snapshot:

Corn: 89.2 million acres, down 2% from last year. If realized, this will be the third consecutive year of an acreage decline and would be the lowest planted acreage in the United States since 2010.

Soybeans: 84.6 million acres (a record high), up 1% from last year. Compared with last year, planted acreage intentions are up or unchanged in 21 of the 31 major producing States.

All Wheat: 55.4 million acres, down 3% from 2014. The 2015 winter wheat planted area, at 40.8 million acres, is down 4% from last year but up less than 1% from the previous estimate. Of this total, about 29.6 million acres are Hard Red Winter, 7.75 million acres are Soft Red Winter, and 3.43 million acres are White Winter. Area planted to other spring wheat for 2015 is estimated at 13.0 million acres, down slightly from 2014. Of this total, about 12.1 million acres are Hard Red Spring wheat. The intended Durum planted area for 2015 is estimated at 1.65 million acres, up 18% from the previous year.

All Cotton: 9.55 million acres, 13% below last year. Upland area is estimated at 9.40 million acres, down 13% from 2014. American Pima area is estimated at 150,000 acres, down 22% from 2014.

This report is based on surveys done the first two weeks of March, Gulke says, and December 2015 corn prices have rallied since then. “But, this report implies that even with lower corn prices in early March, compared to soybeans, farmers never intended to reduce corn acres that much,” Gulke says. “It looks like the price of corn was not low enough to reduce acres.”

Farmers showed they will increase sunflowers, barley and sorghum acres, all to the tune of 10% or more compared to 2014 acres.


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Spell Check

Tulsa, OK
4/3/2015 01:52 PM that we have had at least 2 peak years w/ valleys in between & w/ now the perception/realization that this era of price volatility is the new norm.....notice that the livestock & grain mkts. have moved opposite to each other as the extremely high grain prices puts livestock profits down while the cheaper grain prices are now occuring during high livestock the grain volatility has spilled over of course into livestock making that mkt. volatile as well. But I would look into getting value added from your grains during the price valleys by putting it into livestock. This would reverse during the grain peak yrs. but not necessarily if again you would also hedge your livestock production which moves opposite of the grain prices. I know it would be simpler if we all could just specialize w/ either one or the other but this new era of grain volatility changes everything & makes operating a farm either grains or livestock more complicated/difficult due to the amt. of marketing involved.

Tulsa, OK
3/31/2015 09:23 PM

  I still have family farming in East Central IL & I have been telling them that the days of falling out of bed making money w/ farming is now have to do some marketing w/ hedges. We all saw in 2008 that you should have priced your '08, '09, '10 & '11 crops off the '08 highs that happened in July. Then in 2012 you should have priced your '12, '13, '14 & '15 crops off the '12 highs that happened in August. If a farmer had done this you would have had 8 years of extremely high prices instead of just 2 but more importantly you would have had 7 years of those extremely high prices combined w/ either avg. or above avg. yields instead of drought reduced yields to really propel your income statement, savings, land purchases, machinery upgrades, etc. You have to utilize the peak prices to get you thru the valleys because surely everyone realizes by now, now that we have 2 examples in '08 & '12, that high prices do not last just like low prices do not last. There is a business cycle to farming just like other businesses. The Dec '15 corn price was $8.0275 back in August '12. Nov '15 soybeans were $17.6450. Now take probably this yr's corn yield of 200 bpa x $8 = $1,600 ac. & soybean yield of 60 bpa x $17.6450 = $1,058 ac. (minus hedge costs). In this new ag era of volatile grain prices due to ethanol using so many corn bu. & an insatiable foreign appetite for soy products to convert into meat protein the difference between the bankrupt farmer & the prosperous/expanding farmer is the use of marketing.

Tulsa, OK
4/3/2015 01:41 PM

  Zorcon.....when I speak of hedging I mean the use of options w/out any margin calls. These of course are preferable because they act like an insurance policy w/ a set "premium" cost & not an unknown future amt. of margin calls, etc. if the mkt. moves against your position. Options are my tool of choice because you can lock in a floor but can participate in any rally if conditions warrant it & then you have to mkt./price your crop again....a good position to be in if necessary. Again, I've had family members burned w/ margin calls & now that makes them gun-shy & wary of using options.....totally different ballgame. I tell them you went w/ margin calls because if the mkt. doesn't move against your position it takes very little money. So there are always trade offs.....options cost more up-front but there are no possibility of future margin calls so it depends on your bank, financing your position, etc. And w/ options sometimes it seems unnecessary because like last yr. everyone knew that $5 was a very good price in May because the only reason it was that high to begin w/ was due to the delayed planting but it would have put your option in place then you still had the Summer weather growing season to go thru. And though it was statistically unlikely that a drought would happen you never know w/ weather so you would have gone ahead & put on the option/price a profitable price level. Granted, not as high as yrs. previously but we were all warned about what could happen if we had a bumper crop....then we had a bumper crop.


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