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Lower prices pulling acres out of productionLower prices pulling acres out of production

Forrest Laws 1

April 2, 2009

4 Min Read

U.S. farmers could plant 3.8 million fewer acres of corn, soybeans and wheat in 2009-10 as dramatically lower commodity prices and higher input costs force them to rethink the scale of their operations.

USDA's Wheat, Feed Grains Rice and Oilseeds Interagency Commodity Estimates Committee says combined U.S. plantings of corn, soybeans and wheat could drop to 221 million acres, which would be down 3.8 million from last year's 24-year high.

“Declines in wheat seeding will more than offset an expected 1.3-million-acre increase in combined corn and soybean planted area,” the committee said at the Agricultural Outlook Forum in Arlington, Va. The committee includes members from USDA's World Agricultural Outlook Board, Economic Research Service, Farm Service Agency and Foreign Agricultural Service.

The committee said the 2009-10 outlook is driven by declining prices for grains and oilseeds and an overall less favorable net return outlook for those crops than a year ago when futures prices hit record levels.

“Area planted to the major crops is expected to decrease with prices well below record levels experienced during the spring and summer of 2008,” the forecast said. “Wheat production is projected lower with less winter wheat seeded last fall, expectations for lower spring wheat seeding and a decline in yield from last year's record.”

USDA economists said 2009 plantings of corn are likely to remain unchanged at 86 million acres while farmers could increase soybean planted area by 1.3 million acres to 77 million, which would be a record.

Most of those acres will come from reduced wheat, cotton and peanut plantings due to lower commodity prices and higher input costs for those crops, the economists said.

“The 2009 acreage outlook reflects declines in prices for grains and oilseeds, high input costs and continued weakness in world demand as financial and economic problems weigh on commodity markets well into next year,” they said.

“Extreme volatility in commodity and input prices during the past year has added uncertainty to producer planting decisions. High fertilizer prices and harvest delays limited fall field work in many areas, also increasing uncertainty this spring.” (Fertilizer prices have fallen from last summer's highs, but remain above pre-2008 levels.)

The economists said wheat planted area in 2009 is expected to decline 5.1 million acres to 58 million. Winter wheat seeded area is down 4.2 million acres due to lower prices, higher fertilizer costs and delays in fall harvesting. Spring wheat could decline 900,000 acres or 5 percent due to the lower price outlook.

The majority of the decrease in winter wheat acres - 2.9 million - occurred in the soft red winter wheat states, which includes the Mid-South and Southeast where growers have been fighting basis problems for the past two harvests. Cash prices have dropped $1 to $2 per bushel below Chicago Board of Trade futures in May and June of the last two years.

If farmers plant 86 million acres of corn, as USDA expects, 2009 seedings will still be significantly higher than the late 1990s and early 2000s when plantings averaged just over 79 million acres. But they still pale in comparison to 2007's 93 million acres.

“Rising demand for corn to produce ethanol to meet the Renewable Fuel Standard is expected to increase corn use in 2009-10 and support corn prices, although at levels well below the highs set during the 2008 growing season,” economists said.

“The sharp year-to-year drop in per-acre net returns for corn is expected to limit acreage expansion. Input costs, especially for fertilizer, have moderated, but remain historically high, making less input intensive crops such as soybeans a preferable alternative for producers, especially outside the higher-yielding Corn Belt states.”

Although some analysts predict farmers could plant more than the forecast 77 million acres of soybeans, the economists say the expansion will be limited by lower double cropping resulting from lower soybean prices and reduced soft red winter wheat plantings in the Delta and eastern Corn Belt.

The economists said rice planted acreage for 2009 is projected at 2.93 million acres, down from 70,000 acres in 2008. “The contraction in rice plantings is based on relatively high returns for competing crops in the Delta - primarily soybeans and corn - and the severe drought in California that will likely constrain supplies of water for irrigation.”

About the Author(s)

Forrest Laws 1

Director of Content, Farm Press

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