Corn might face challenges from other crops on fringes
Although it’s extremely early to make reliable predictions about the crop year ahead, experts are sharing their expectations for potential corn acreage shifts and harvest prices. Chances are good fewer corn acres will go into production this year than in 2015, experts say, but it’s still possible prices will remain extremely low relative to those seen in the past several years.
Producers fail to see the whole picture if they think acreage levels will stick with the status quo, says Chip Nellinger, president of Morton, Ill.-based Blue Reef Agri-Marketing.
“Those fringe acres will be the first ones to come out,” Nellinger tells “Market Rally” radio host Chip Flory in a recent interview. “I think the two target areas would be quite a few acres in North Dakota that would be subject to coming back out of corn ... it doesn’t mean they go into soybeans, but they have a lot of options up there.”
Southern Exposure. Another area where fewer corn acres could be planted is the South, he continues.
“In some of the non-irrigated, less productive acres, we picked up a lot of corn acres the past four years in the South,” Nellinger points out, “and there are some other things at play. Cotton and peanuts are back in the mix.”
Even in the Corn Belt, Nellinger expects some producers to switch to crops such as soybeans. He thinks in some cases, bankers will get involved by telling farmers they can’t plant corn because they can’t afford it.
“Unfortunately, there are some poor decisions that get made around this time in the late winter to early spring timeframe, especially when things are underwater,” Nellinger says. “Then you get the banker putting his spin on it. Absolutely there could be some shifting of corn acres back to soybeans.”
Additionally, Nellinger explains, a lot of corn-on-corn ground, especially in Illinois, has not really produced for three or four years, “most of that because of Mother Nature and some spring conditions. There are a fair amount of acres even in the heart of the Midwest, the I-States, that could switch.”
He thinks the I-States alone could see 1 million acres swing from corn plantings to soybean plantings.
Even so, a FarmDocDaily analysis from the University of Illinois Extension suggests there’s a 20% chance harvest prices for corn could be less than $3 per bushel this year.
“Given the chance of low prices, farmers should maintain high coverage levels when purchasing crop insurance,” advises author Gary Schnitkey, in the report.
Harvest Prices. In perspective, though, a wide range of harvest prices is possible this year, Schnitkey writes. The top end is at $6.73 per bushel while the low end is at $2.75 per bushel, based on historical shifts to either side of the spectrum, he says. There’s just a 7% chance the price will be above $5, according to the data, he says.