Battle for acres heats upThe battle for acres this spring may be the fiercest ever. Prices of virtually all of the crops grown in the Northern Plains are high, providing farmers with plenty of profitable planting choices, at least on paper.
By: Jonathan Knutson, Agweek
The battle for acres this spring may be the fiercest ever.
Prices of virtually all of the crops grown in the Northern Plains are high, providing farmers with plenty of profitable planting choices, at least on paper.
But there’s plenty of anxiety, too: expenses are high, the strong prices may not last, the weather may not cooperate. Making the wrong choice at planting could hurt more than ever.
“The stakes are so high. There’s a lot more stress,” says Scott Knoke, North Dakota State University Extension Service agent in North Dakota’s Benson County.
Concern about a late spring increases the stress, especially in areas such as his where the soil is saturated and some fields may not get planted, he says.
Given the likelihood of late planting, “there’s a lot of indecision yet. The trigger (on what to plant) will be pulled at the very end,” says Terry Weckerly, a Hurdsfield, N.D., farmer and president of the North Dakota Grain Growers Association.
The battle for acres is an annual affair on the Northern Plains. Enough acres must be allocated to all the crops grown in the region
so that the production of each crop will meet demand for it. If the market senses that acreage for a crop might come up short, the price of that crop rises to make it more attractive to potential growers.
This winter, the price of wheat, corn and soybeans, the region’s three most important crops, all are strong. For instance, the average new crop wheat price at area elevators surveyed weekly by Agweek stands at $8.90 per bushel, up from $5 a year ago. High prices for the “big three” makes growing other crops — some of which involve greater risk and specialized expertise — less attractive, which, in the battle for acres, pushes up prices of those crops.
Rotation still rules
Farmers typically rotate crops on a field to minimize problems with disease and insects, among other reasons. Most producers generally stick to that rotation, leaving them only limited ability to switch acres from one crop to another at planting time.
Kurt Krueger, a Rothsay, Minn., farmer and president of the Minnesota Soybean Growers Association, says he holds to a set rotation of soybeans, corn and wheat.
“I don’t veer a lot from it,” he says.
Jim Peterson, marketing director of the North Dakota Wheat Commission, says “there’s a lot of reason to stick with your rotation.”
Wheat has a big place in the rotation of many North Dakota farmers, particularly ones in the western two-thirds of the state, where growing conditions are well suited for the crop.
Peterson thinks wheat acres will at least hold their own, and possibly increase, this year in North Dakota.
Like other officials, he says weather will be a big factor in what’s ultimately planted. Wheat, a cool-season grass, typically does best when it’s planted early. Planting delays could lead to acres being switched from wheat to other crops.
In any case, most area farmers have at least a few “flex” or “discretionary’ acres that can be switched from one crop to another, depending on prices.
Rotations also are altered when the weather and planting conditions demand doing so.
Looking at the big picture
Everyone involved in agriculture is keenly interested in the battle for acres, says John Anderson, senior economist with the American Farm Bureau Federation in Washington.
“The central issue in agriculture right now is what will be planted this spring,” he says.
Global supplies of major crops are tight, and “the market wants more of everything.” With the higher prices, producers have “a strong inventive to aggressively produce,” he says.
American farmers will do just that by planting more acres, the U.S. Department of Agriculture predicts.
Corn will be planted on 92 million acres, up from 88.2 million a year, USDA says.
Soybeans will account for a record 78 million acres, about half a million acres more than last year, USDA says.
Wheat acreage is pegged to rise to 57 million acres from 53.6 million last year.
Cotton acres are expected to rise to 12.75 million from about 11 million last year.
If USDA is right, roughly 10 million more acres will be planted to those four crops, says John Sanow, grains analyst with DTN in Omaha, Neb.
USDA apparently figures additional acres will come from land taken out of the Conservation Reserve Program or from land that couldn’t be planted last year, he says.
Pasture that’s broken up this spring and cropped also is expected to account for some of the additional acres, Anderson says.
In any case, competition for wheat, corn, soybeans and cotton acres is strong, as is competition for acres for “niche” crops, Sanow says.
What really stands out this spring is that for the first time in years, there are questions about whether American farmers can plant enough acres to fully meet demand, Anderson says.
“It’s been a long time since we’ve had meaningful capacity constraints,” he says
Plethora of choices
Benson County in north-central North Dakota is a good example of an area where farmers have many planting choices.
About 360,000 acres were planted to crops in 2009 in the county. Spring wheat (120,000 acres) and soybeans (87,000 acres) accounted for more than half the acres.
But significant amounts of barley, corn, winter wheat, canola, flax, sunflowers, dry beans and dry peas were grown, too.
Canola projects the highest return at $83.04 per acre, according to the NDSU Extension Service.
Spring wheat is well down the list at $57.20, though that’s still an unusually profitable rate.
Weckerly says that wheat prices are high enough that he’s leaning strongly to growing more of that crop, especially given potential planting delays.
New crop wheat, even after falling off in late February, generally is fetching $8.50 to $9 per bushel — a price that farmers seldom have seen.
But canola prices are strong enough that the crop is drawing interest from producers in the county, Knoke says.
Corn or soybeans?
The choice of what to plant this spring can be difficult even when producers are deciding between just a few crops. Kingsbury County in east-central South Dakota is a good example of that.
In 2009, 145,000 acres of soybeans and 138,600 acres of corn were planted in the county. Another 23,200 acres of wheat (12,200 spring and 11,000 winter) were planted, along with 2,200 acres of oats.
If prices were the only factor, producers in the county probably would plant more corn and less soybeans this spring, says Gary Duffy, who raises corn and soybeans in Kingsbury County.
“The market is asking for more corn acres,” says Duffy, an Oldham, S.D., farmer and president of the South Dakota Soybean Growers Association.
But this probably won’t be a normal spring. Wet conditions could delay planting, causing more soybeans and less corn to be planted, he says.
Weather conditions in April “are going to be critical. Mother Nature is going to have a big say in this,” he says.
Duffy sees two other factors that will influence what farmers plant:
n What prices will producers pay for their inputs? Some crops require more inputs, which makes those crops less attractive if input costs are high. For instance, soybeans produce their own nitrogen, a key fertilizer, which encourages farmers to plant beans when nitrogen prices are high.
n How many bushels can a producer handle at harvest?
Corn yielded an average of 161 bushels per acre in Kingsbury County in 2009, while soybeans yielded an average of 40 bushels per acre. So planting more corn, even if it holds greater financial return, isn’t wise if the producer is overloaded at harvest, he says.
Planting and marketing
Going hand-in-glove with the decision of what to plant is the question of whether to price some of the 2011 crop at current levels. That can be done in several ways, including using the futures market or contracting a portion of the anticipated crop.
Some producers have priced some of the 2011 crop, although it’s difficult to estimate how much, Peterson and others say.
Pricing some of the crop at current levels makes sense, but producers shouldn’t get carried away, officials say.
Crops aren’t even in the ground yet, so profitting from high prices is “still pie in the sky,” Anderson says.
He and others say farmers worry that selling too much of the 2011 crop now will hurt if prices rise even more.
Because world crop stocks are so tight, weather concerns in key growing regions would push up prices, at least temporarily, Sanow says.
Krueger says there’s no one-size-fits-all solution to marketing or planting.
“Every operation will have to decide for itself what’s best,” he says.