U.S. farmers reacted to global markets in making a major shift by intending to plant more acres in corn this year than last, a situation that could add to abundant supplies and result in lower prices for producers, Purdue University agricultural economist Chris Hurt says.
Farmers indicated in a USDA survey they would plant 6 percent more acres of corn this year - 93.6 million, the most since 2013 and the third highest since 1944 - because of a world surplus of wheat and reduced sorghum demand from China.
Farmers expect to reduce their acreage of both wheat and sorghum and replace it with corn and cotton. Cotton acreage would increase by 11 percent.
"The bottom line is that 93.6 million acres is too much corn acreage that with normal yields will cause further building of already-large corn inventories," Hurt said. "Production would be expected to move above 14 billion bushels, with corn prices at harvest falling to the lower $3 per bushel."
The reduction in wheat acreage is related to low prices from the surplus of that crop and increased international competition. The lower demand for sorghum is the result of reduced use in Chinese feeding rations, causing sorghum prices to drop relative to corn.
The shift is less apparent in the Corn Belt. Still, corn there could increase by 1.5 million acres. Somehow, Hurt said, farmers in the Corn Belt also are going to plant 840,000 more acres of soybeans, and more wheat acres as well. This made Hurt wonder whether farmers might have over-estimated their total acreage numbers.
The Prospective Plantings report of the USDA's National Agricultural Statistics Service, released Thursday (March 31), is based on a nationwide survey of 83,000 farm operators. It was conducted in the first two weeks of March.
The estimated corn planting area nationally is up 6 percent from last year's 88 million acres. Indiana farmers indicated they would plant 5.8 million acres in corn, up 3 percent from 5.65 million last year.
Soybean farmers nationally intended to plant 82.2 million acres, down less than 1 percent from 82.6 million from last year. Farmers in Indiana planned the same amount as last year: 5.5 million acres.
Hurt said soybean stock supplies were about 40 million bushels lower than expected, indicating that more soybeans might have been used than expected or the size of the 2015 crop was over-estimated. In addition, soybean acreage nationally was 660,000 acres smaller than pre-report estimates. This means, Hurt said, that the 2016 crop would have U.S. average prices near $9 for the marketing year.
"These reports together suggest that the market prices of corn and soybeans will now adjust to give producers reduced financial incentives to plant corn and increased price incentives to plant more soybeans, spring wheat and other spring-planted crops," he said.
Hurt noted that spring weather also will be important in determining how many acres get planted to each crop. The weather has tended to favor an early start to the planting season, which generally favors corn acreage.
Corn and soybean outlook
During a webinar about acreage prospective, Hurt gave his outlook for corn and soybeans.