High costs associated with fuel and nitrogen fertilizer and the alleviation of fears of a soybean rust epidemic are driving U.S. growers to plant less corn and more soybeans this season, says an Ohio State University Extension economist.

The size of the shift took some analysts by surprise, said Matt Roberts, an assistant professor with the Department of Agricultural, Environmental, and Development Economics.

“Everybody expected to see some acreage shift, in the range of about 2 million acres,” said Roberts. “But what makes this one so surprising is its size, roughly 4 million acres being switched from corn to soybeans.”

According to the U.S. Department of Agriculture prospective plantings report, U.S. growers intend to plant 78 million acres of corn. If realized, it will be the lowest corn acreage since 2001. Soybean producers intend to plant nearly 77 million acres. If realized, it will be the largest on record. In Ohio, growers intend to plant 3.15 million acres of corn, down 300,000 acres from last year. If realized, it will be the lowest corn acreage since 1996. Soybean production is forecast at 4.65 million acres, up 150,000 acres from last year and the highest acreage since 2002. Additionally, Ohio producers planted 130,000 more acres of winter wheat than last year.

“What appears to be going on is a lot of farmers are very worried about high fuel costs and high fertilizer costs. And not just with nitrogen but with phosphorus and potassium as well, and that is making corn less desirable,” said Roberts. Unlike corn, soybeans naturally fix nitrogen from the soil, so little or no fertilizer is generally required in soybean production.

“At the same time, concerns over soybean rust appear to be decreasing," said Roberts. "I think a lot of farmers who switched to corn and away from soybeans last year see less of a threat from soybean rust and are much more comfortable moving back to soybeans.”

The large shift in planting acreage is spurring concerns in both the corn and soybean markets. For one thing, despite the large corn inventories projected this summer -- over two billion bushels – an additional 400 million to 500 million bushels of corn will be allocated to ethanol production from the previous year. Roberts noted that for the first time, ethanol production will pass exports as the second largest user of corn. The largest user is the feed industry.

“The issue is what this increased ethanol demand will do to overall corn prices and the cost of production for livestock producers. There will be fewer acres so we will see fewer bushels and that will drive up corn prices,” said Roberts. “Like corn producers, cattle producers are sensitive to their input costs, and they are concerned about the prices they will have to pay in the coming year. Already we are seeing very strong indications that corn prices are going up. Historically, we would expect corn prices for a new crop to trade somewhere in the area of $2.05 to $2.10 a bushel. Right now those prices are closer to $2.25 to $2.30.”

by Candace Pollock