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Trade war entices farmers to switch acres to corn

'There is some optimism for corn. There is less so for soybeans.'

by Jeremy Hill

Corn could prove a bottom-line bulwark this year for U.S. farmers.

The potential for greater profit from the cereal compared with soybeans in key regions such as central Illinois may lead U.S. farmers to shift some acres to the yellow kernels. Many so-called row crop farmers in the U.S. are considering sowing more corn and reducing acres with the oilseed as they watch and listen for clues from the U.S.-China talks this week.

“Farmers are going to really take a hard look at corn this year as an alternative to soybeans,” Gary Schnitkey, an agriculture professor at the University of Illinois in Urbana, said in a telephone interview. “There is some optimism for corn. There is less so for soybeans.”

The trade war and a large forthcoming South American crop have pushed U.S. soybean prices 15% below their 2018 high. Corn has fared much better.

Returns on an acre of corn this year should eclipse those from an acre of soy on high-productivity farmland in central Illinois, the first time that’s happened since 2015, according to budgets that assume crop rotation created by Schnitkey.

Another draw is that the U.S. is less reliant on export markets for its corn crop than soybeans, Schnitkey said. In recent years, the U.S. has exported about half its soybean crop, much of it to China, compared with 15% of corn, according to U.S. Department of Agriculture data.

Given these reasons, corn acres are widely expected to rise and soy acres to shrink this year. U.S. soybean planting may slip 5.5% to 84.6 million acres as corn increases 1.3% to 90.3 million acres, according to a Farm Futures report this month. The USDA is expected to release its prospective plantings report at the end of March.

Many growers still don’t have their total acreage locked in and will decide in coming weeks, Ted Seifried, chief market strategist at Zaner Group in Chicago, said by telephone. A trade resolution and rebound in soy prices could always add a new wrinkle to upcoming planting decisions.

“There are still some swing acres out there,” Seifried said. “If we get a spike in soybeans and guys get a chance to make some decent sales compared to what we’ve been seeing, that’ll save some soybean acres.”

--With assistance from Shruti Date Singh.

To contact the reporter on this story: Jeremy Hill in New York at [email protected]

To contact the editors responsible for this story: James Attwood at [email protected] Shruti Date Singh

© 2019 Bloomberg L.P

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