Soybeans’ Turn to Shine

A half-dozen years ago, corn was the fast-rising star of Upper Midwest agriculture. Attractive prices caused many farmers to plant more of it and encouraged some producers to grow the crop for the first time.

But this spring is different. Going into the 2018 crop season, corn’s luster has dimmed and soybeans are shining relatively brightly. Farmers can reasonably anticipate making more money from soybeans than corn, and that’s expected continue for at least the next few years.

“The outlook is positive, that’s for sure,” said Jerry Schmitz, a Vermillion, S.D., farmer and president of the South Dakota Soybean Association.

Nobody’s writing off corn. By all accounts, the crop will remain a major player in the Upper Midwest.

“Crops go through cycles,” and though the the current cycle isn’t favorable to corn, the crop is far too important — and still holds too much profit potential — for farmers to abandon, said Kevin Skunes, an Arthur, N.D., farmer and president of the National Corn Growers Association.

Soybeans aren’t free of worries, either. The Trump administration’s tough stance on trade, including the president’s comment that “trade wars are good and easy to win,” worries U.S. soybean growers. Roughly half of U.S. soybeans are exported, so any drop in exports would hurt bean prices.

“It’s a serious concern,” Schmitz said.

Other U.S. crops and agricultural commodities are at risk, too, said Theresia Gillie, a Hallock, Minn., farmer and immediate past president of the Minnesota Soybean Growers Association.

“Yes, soybeans need our export markets. But so does corn. So does U.S. agriculture,” she said.

An example

One measure of why soybeans hold more appeal this spring:

Farmers in southeast North Dakota — an area where cropping patterns and growing conditions are similar to those of eastern South Dakota and southwestern Minnesota — will see a estimated gain of $24.08 per acre with soybeans and a projected loss of $47.07 per acre with corn, a $71 per-acre difference in soybeans’ favor, according to the North Dakota State University Extension’s 2018 Projected Crop Budgets.

For the 2012 crop season, in contrast, NDSU projected that southeast North Dakota farmers would earn $131.38 per acre with corn and $86.07 per acre with soybeans, a $45 difference in corn’s favor.

The difference in projected profitability contributed to surging interest in corn, which was detailed in the May 7, 2012, Agweek cover story, “Corn is King this Spring.”

Why the swing in projected profitability? In a word, prices.

Though both corn and soybean prices have dropped, corn prices have fallen more. Corn was projected to fetch $4.97 per bushel in 2012 and $3.25 per bushel this year, a decline of 34 percent. Soybeans were estimated to bring $11.12 per bushel in 2012 and $8.97 per bushel this year, a decline of 19 percent.

Supply and demand

Supply and demand accounts for the changing fortunes of corn and soybeans prices, economists say.

In the short term, Argentina’s poorer-than-expected soybean crop is pushing up prices, said Frayne Olson, NDSU crop economist.

Longer-term factors are in play, too.

The United States is the world’s leading corn producer and exporter. But only about 15 percent of U.S. corn is exported, compared with 50 percent of U.S. soybeans.

“Exports are important to corn, but not as important as they are to soybeans,” Olson said. “What happens internationally (with soybeans) has a huge impact on what happens domestically.”

As is widely recognized, soaring corn prices in the late 2000s and in 2010-12 were triggered by fast-rising ethanol use, Olson said.

Less widely recognized is that strong and growing foreign demand for U.S. soybeans pushed up soybean prices in the same period, he said.

In the past five or six years, ethanol consumption has stabilized, with a much smaller growth rate. But foreign demand for U.S. soybeans continues to grow rapidly, Olson said.

The supply of corn and soybeans produced by U.S. farmers factors in, too.

Per-acre yields, as measured by trend lines, or the general statistical pattern over time, are rising for both U.S. corn and soybeans. Yields don’t go up every year — weather inevitably has a role — but the trend lines are rising, reflecting new and better seed varieties and other improvements in technology.

Average per-acre U.S. corn yields rose from 127 bushels in 1995 to 160 bushels in 2012 and 176.6 bushels in 2017, an increase of 38 percent from over the entire period.

Average per-acre U.S. soybean yields rose from 35.3 bushels in 1995 to 40 bushels in 2012 and 49.1 bushels in 2017. That’s an increase of 39 percent over the entire period, nearly identical to the per-acre increase in corn.

The difference is, demand for soybeans — bolstered by foreign demand — is rising fast enough to offset the yield gains, while demand for corn is not, said Matt Roberts, an agricultural economist and consultant who spoke at a recent farm show in Grand Forks, N.D.

Corn farmers remain committed to further increasing per-acre yields and also to working with customers, including cattle producers who feed corn to livestock, to boost demand, Skunes said.

Hitting a home run

U.S. farmers and ag economists sometimes talk about “hitting a home run,” a metaphor for planting, harvesting and marketing a particularly profitable crop in a given crop season.

Corn is still considered a potential home run because big yields, even when coupled with poor prices, could provide good overall income, farmers and economists say.

“The possibility of big yields is attractive,” Skunes said.

Soybeans, in turn, offer less potential for big yields but greater potential for a big jump in prices, Olson said.

Acres gained, lost

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.

Even so, corn was a big acreage gainer from 1995 to 2012, both nationally and regionally. U.S. farmers planted 95.5 million acres in 2012, up from 71.5 million in 1995. North Dakota, South Dakota and Minnesota saw big increases, too.

In the past few years, however, corn acreage has dropped, both nationally and regionally, as profits from the crop have declined.

Soybeans gained acres from 1995 to 2012, too, though the increase was smaller than the growth in corn acres. But soybeans have continued to gain acres in the past few years, at least in part become they’ve become relatively more attractive than corn.

Corn has been the most widely planted U.S. crop since 1983, when soybeans last held the top spot. A Reuters poll of private industry analysts finds that could change this spring, with soybean plantings projected to slightly exceed corn acres.

Many Upper Midwest farmers invested heavily in corn during the boom years, buying new equipment to plant and harvest it and building new bins in which to store it. Those investments made farmers more efficient and better positioned them to stick with corn when prices are poor and to benefit when prices are good, Skunes said.

Skunes, who like many Upper Midwest farmers grows both corn and soybeans, said he’s confident that corn’s future remains bright.

Source: Jonathan Knutson, Agweek

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