The conventional wisdom in advance of USDA’s March 31 Planting Intentions Report seems to be that farmers will plant more acres of soybeans and fewer acres of other crops.
Conventional wisdom is sometimes wrong, and Stephen Nicholson, grain and oilseeds analyst with Rabobank’s Food & Agribusiness Research and Advisory Group, thinks history may be repeating itself in the end-of-the-month report.
“We’ve had a lot of discussions about soybean acres, and right now the Rabobank forecast is for 85.3 million acres,” he said. “That’s below a lot of expectations, and there are a couple of things with that.” (Conventional wisdom seems to be above 85.5 million acres.)
“When we look at the heart of the Corn Belt, do you really plant 50-50 corn and soybeans and get a 50-50 rotation?” asked Dr. Nicholson, a speaker at a lunch sponsored by Rabobank at the Mid-South Farm and Gin Show. “That just doesn’t make any sense, and we don’t think that’s going to be the situation. People aren’t going to do that because they’ve got to have corn.”
The corn situation is just as important as soybeans, he noted. “You look at the Corn Belt, and one of the reasons they plant corn – aside from the fact the like to plant corn – but the other thing is look at the yields of corn vs. soybeans. It doesn’t matter if you’re here in the South or in the heart of the Corn Belt, corn yields continue to climb for lots and lots of reasons.”
Nicholson cited better genetics and , different cultural practices as the driving force. “So we see this great potential for increases in yield,” he said. “Farmers see that, and they see more revenue, and they think that’s what I need.”
The climb in soybean yields, on the other hand, has been relatively small and the revenue outlook has not been as great.
“So to say we’re going to have this huge surge in soybean acres seems to me to be a little premature to say that at this point,” he said. “We do know it’s cheaper to plant beans, and farmers may say it’s cheaper so that’s what I will do.
“But if you look at other parts of the country they have a lot of opportunities to plant different crops. So there can be a lot more diversity on the row crop side. Here in the South you can plant cotton, you can plant corn, you can plant rice, you can plant wheat or grain sorghum. That’s the other thing – farmers have an opportunity to diversify their operation, and they’ll do that.”
Dr. Nicholson said he also more bearish on soybean prices than some analysts. While the University of Missouri’s Food and Agricultural Policy Research Institute outlook has been predicting soybean prices to average around $9.50 per bushel, Nicholson says he believes a low of $8.50 is possible.
“We do think it’s going to be a long, slow slog downward,” he said. “Soybean prices will get under $9 – we’re looking at the board now – as we get into the fall. We think it may settle in the $8.50 area as we get into harvest lows.”
After harvest when Brazil and Argentina begin planting, prices could rise slightly, “but we think we’re looking at soybeans under $9,” he noted.
To see more information on the 2015 crop outlook, visit http://www.ers.usda.gov/media/1776016/oce151d.pdf and http://farmdocdaily.illinois.edu/2015/02/us-soybean-production-prospects-2015.html.