While both corn and soybeans appear to generate positive returns for 2012, corn offers growers $150/acre more given current prices.
"With the prevented planting we saw last spring in the Dakotas and the eastern Corn Belt, we could see another sizeable shift of land into corn production," says Chad Hart, ag economist at Iowa State University. Futures indicate 2012/13 season-average prices in the $6 range for corn and the $12 range for soybeans. Futures markets aren’t quite as bullish as USDA’s crop price projection, he notes.
"With sustained high prices for both crops, the acreage competition should be interesting again," Hart says in the November issue of Iowa Farm Outlook. "Corn looks to have the upper hand in the competition." He notes, though, that crop input costs are headed up again, repeating the scenario of 2008 and 2009.
Hart continues that USDA expects a sizeable cutback, with corn export demand estimated at 1.6 billion bushels, down significantly from last year. Weakness in the U.S. dollar supports the export outlook, but the feed competition and increases in worldwide corn production offsets that effect, he says.
On the bullish side, biofuel development continues to support corn and soybean markets. Corn demand for ethanol topped the 5 billion bushel mark for the 2010 crop, and that figure is likely as well for both the 2011 and 2012 crops, Hart says. "Biodiesel demand for soybean oil will be a key variable to watch in 2012." The latest monthly figures (from July) from the U.S. Department of Energy show record biodiesel production in the U.S. USDA expects another surge in biodiesel production in 2012 as the industry ramps up to meet the biodiesel portion of the Renewable Fuels Standard. While oil prices have had their ups and downs this year, overall, the energy price pattern continues to support biofuel production and crop prices, Hart says.
With higher demands and tighter-than-normal stocks, prices have been pulled to projected record levels, he notes. "Based on mid-points of USDA’s season-average price range, the 2011/12 crop year looks to be the most profitable in quite some time, if not ever."