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Weak prices discourage acreage expansion

Weak prices discourage acreage expansion
Farm Futures' survey shows more corn, less soybeans for 2016

Low prices and poor profit margins should keep expansion plans by most growers under wraps for 2016, according to Farm Futures latest survey of planting intentions.

While the magazine found farmers ready to boost corn acreage this spring, the increase is modest at 89.5 million. That would be up 1.7% from 2015, which was reduced substantially by bad weather, but 1.1 million acres below levels achieved in 2014.

Growers told Farm Futures they plan to cut back on soybeans, intending to plant 82.2 million acres, down around 500,000 from 2015. While flooding also set back soybean seedings in 2015, economics may keep growers from taking another crack at soybeans with that ground.

Growers are trending toward more corn than soybeans for 2016, but keeping true intentions under wraps for now.

“Neither corn nor soybeans is showing a profit based on current 2016 crop prices, but corn has better potential to break even this year,” says Bryce Knorr, Farm Futures senior grain market analyst. “Farmers are beginning to recognize this, even though corn will require more cash flow in a tight year to plant due to higher production costs.”

Those tight margins should keep farmers from boosting overall acreage much, says Knorr, who expects more land to go into forage crops or lay fallow unless markets improve.

Results of the survey were released this morning on the opening day of the Farm Futures Business Summit in St. Louis.

One big question facing the markets is what will happen to winter wheat ground that wasn’t seeded last fall. On Jan. 12, USDA reported a 2.85 million acre drop in seedings. While growers in the Midwest boosted acreage, wet weather kept farmers in the South from putting in fields. Low prices appeared to discourage farmers on the Plains from sticking with wheat.

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The Farm Futures survey suggests farmers on the Plains will favor corn over soybeans, if they have water available, either through rainfall or irrigation. But Plains farmers appear ready to hit the pause button on sorghum expansion, after rushing to plant that feed grain in 2015. Farm Futures estimates sorghum acreage could fall 2.5% to 8.25 million in 2016.

"Sorghum’s premium to corn soared to record levels in 2015 after China began buying,” says Knorr. “But increased production swamped demand, and sorghum is trading at a weaker than normal discount to corn in many areas on the Plains.”

Spring wheat seedings could see another year of modest expansion this spring. The Farm Futures survey put acreage on the Plains up less than 100,000, to 13.3 million. With durum acreage also rising, that could leave total wheat acreage at 52 million, down almost 5% from 2015.

Farm Futures surveyed more than 1,550 growers from Dec. 7 to Jan. 4. Farmers from all over the country were invited by email to complete the survey online.

Source: Farm Futures

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