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Volatility is the word -- Plantings plans portend continued price swings

The government's first survey of what farmers will plant in 2008 shows a cut in corn acres and another year of extremely volatile, but potentially profitable agricultural prices.

The government's first survey of what farmers will plant in 2008 shows a cut in corn acres and another year of extremely volatile, but potentially profitable agricultural prices.

The much-anticipated survey shows farmers plan to plant 8 percent fewer acres of corn this year than they did last year, the U.S. Department of Agriculture's National Agricultural Statistics Service says.

North Dakota's corn acreage will decline by 12 percent, if the projection holds true. In South Dakota, home to numerous ethanol plants, corn acreage will decline 7 percent.

North Dakota, the big producer of hard spring wheat, which has seen historically high prices in the $15- to $20-per-bushel range in recent months. Wheat prices have declined, but acreage will be up 4 percent, to about 6.9 million acres, according to the report.

Soybean production will jump 18 percent nationwide. North Dakota's soy acres will increase 16 percent and Minnesota 14 percent. South Dakota, which has 800,000 acres of soybeans, will increase a whopping 28 percent.

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North Dakota currently is without an extension grain marketing specialist.

Alan May, a South Dakota State University Extension Service grain marketing specialist in Brookings, says the grain trade saw in the report what it expected -- fewer acres of corn and more acres of soybeans.

"We never really know until we get into the planting season," May says. "We have the potential for tighter supplies of corn and bigger supplies of soybean."

May says farmers in North Dakota, South Dakota and Minnesota likely were influenced by increasing costs of inputs for corn, especially fertilizer, and whether they will even get sufficient supplies of fertilizer

Bill Craig, regional extension educator in Agricultural Business Management for the University of Minnesota-Crookston, illustrates:

"A producer I spoke to was talking about a neighbor that had prepaid for starter fertilizer last year. A week or so ago, he was contacted and told they don't have the fertilizer and couldn't get it to him," he says.

Soybeans "fix" their own nitrogen from the air, while corn typically needs supplemental nitrogen.

Craig also points out that rotation from the corn-heavy plantings in 2007 also will affect this year's plantings.

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"Last year, we had less soybeans, and I think a lot of them are going back to soybeans in their rotations," he says.

Will they change

their minds?

Farmers sometimes shift their planting intentions because of the report itself, May says.

In 2007, there was a "massive shift" between the March report and the June 2007 report.

"Almost everyone had figured an 8 (million) to 12 million acres of additional corn, and we ended up with 15 million acres," he says. Meanwhile, soybean numbers last year ended up about 12 million acres fewer than the projections report.

In previous years, corn and soybeans had a 2 million to 2.5 million annual shift, back and forth. "Then it became evident that this market was there -- that we could plant a lot more acres of corn, and they did," May says.

The difference between unofficial trade expectations and the government report is what often makes the market. The much-anticipated corn planting intentions figures show an acreage of 6 million acres -- almost 7 million fewer acres than a year ago. "I think the trade was looking for 5 million to 6 million fewer," May says.

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Farmers say they'll plant 74.8 million acres of soybeans -- up 9 million acres from a year ago.

"Almost everyone in the trade was expecting a 6 million to 7 million acre increase in soybeans," he says.

May says he tells farmers, regardless of the marketing strategy they use, to be sure to "understand the price they need for the cost of production and profit." At the very least, farmers should buy some price protection, so they don't have to take a low price later on.

Wheat prices were down March 31 with farmers indicating they'll plant 50 million to 60 million more acres than was planted a year ago.

Hard red spring wheat is pegged at 14.3 million acres, about a million acres more than last year. May says that's not unexpected, with recent crop prices.

Erica Peterson, a marketing specialist with the North Dakota Wheat Commission in Bismarck, says the report is good news for wheat in general.

"We did lose some acreage last year, but this year, we'll be up to 9.2 million total wheat acres," accounting for the 8 percent increase.

U.S. durum production will increase 22 percent, according to the report, with North Dakota increasing 11 percent and accounting for two-thirds of the nation's output.

Corn trending lower

Tom Lilja of the North Dakota Corn Growers Association notes the March projections for corn have been "a little on the low side" for the past four years.

May notes that the United States has the lowest domestic supplies of wheat than the country has had in 60 years, which is "a pretty extreme situation." It is unclear whether increases in winter wheat plantings last fall will add enough carry-over supply to turn that around.

Hard red spring wheat prices that hit highs of $15 to $20 per bushel have since dropped considerably, but May thinks profitable prices are here for awhile.

"I don't know that we'll go back to $4 or $5 (-per-bushel) wheat anytime soon, he says.

May says it isn't clear how much the expiration or withdrawal of land idling acres under the Conservation Reserve Program will affect corn production. Land that comes out of production sometimes takes time to get to optimal production.

May says that if feed prices get too high, livestock producers will tend to start marketing their animals at lower weights.

At least some central Montana ranchers are considering these adjustments.

"Our guys in central Montana are pretty traditional," says Wade Crouch, extension agent for Montana's Cascade County. "There are a few that are looking at calving later. By calving later, their hay pile is much less in demand. And they're still selling about the same time, they're just selling lighter."

Great Plains states have more cow-calf producers who take a bigger hit when cattle feedlot operators have to decide whether to pay for corn or calves. Meanwhile, ethanol producers, whose product is tied to the crude oil price, can afford to pay more.

Tom Petry, a North Dakota State University livestock marketing economist in Fargo, agrees. "I like to say that, for fall feeder cattle prices, if corn prices go up 10 cents a bushel, the feeder prices will change by $1 per hundredweight in the opposite direction."

When things are this tight, any weather occurrence -- either too wet or too dry -- will make for a jittery corn market. "And the feeder cattle market will be extremely volatile, too, probably more so than any time in history."

Specialty crops also were part of the report. Sunflower acres will be up 4 percent, nationwide, the report says. North Dakota's expected 1.045 acres represent a 3 percent cut in acres. Meanwhile South Dakota will boost acreage by 8 percent, and Minnesota will increase 5 percent, on a smaller total acreage base.

Barley production will increase 3 percent, according to projections, with North Dakota increasing 5 percent and Minnesota cutting 8 percent.

Montana may see barley competing for its spring wheat acreage in 2008, thanks again to higher input costs.

"With the price of barley, right now, the income per acre is going to be close to a wash with spring wheat," Crouch says. "So I think there's going to be a lot of barley planted where otherwise they'd have planted spring wheat just because they don't have to hit the fertilizer so heavy."

U.S. sugar beet production will decline by 9 percent. That includes a projected 25 percent cut in Montana, 14 percent cut in North Dakota and 11 percent cut in Minnesota.

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