What Drives a Corn-Soybean Switch?

December 13, 2013 11:00 PM
What Drives a Corn-Soybean Switch?

This December, plenty of farmers are thinking about three things: Weather, corn prices and soybean intentions for 2014. That’s true in North Dakota, where a recent conference of state producers featured presentations by President Jerry Gulke of The Gulke Group and others. He shared highlights from the meeting with the Weekend Market Report.

Weather patterns indicate the U.S. is in for a very normal 2014, Gulke notes. Meteorologists will get a better handle on the situation in March and April.

As for corn prices and soybean-planting intentions, farmers are well aware that those issues go together. Planting soybeans generally requires less capital than corn, Gulke says, so it can be tempting to shuffle acreage.

"You go back to 2007 and 2008 when we planted a lot of corn," Gulke explains. "The price of corn fell out of bed in 2008. The next year, we switched … from corn to beans and then when corn went up again, we switched back out of it again. We can do that again."

Yet even if that switch occurs, it’s unclear how many acres it will affect.

"I think the market thinks there’s going to be at least 6 million acres go to beans," Gulke says. "That means an oversupply of beans if we get a crop, but it’s probably not enough reduction in corn to make a lot of difference in the carryover … we need to see 88 million of corn planted, and that’s about a 9-million-acre drop. I don’t know if we can get that unless corn falls out of bed completely."

Click the play button below to hear Gulke’s complete analysis, including discussion about the influence of big crops in South America and Canada on the U.S. market:

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