Iowa Farmer Today
04-15-06
Production costs, ethanol demand shape planting decisions
By Gene Lucht, Iowa Farmer Today
FLOYD -- This is ethanol country, and the demand for that home-grown fuel is
enough to keep Pam Johnson and most of her neighbors from moving acres from
corn toward soybeans this spring.
But, a couple hundred miles southeast of here, Jefferson County farmer Jerry
Main checks out the high cost of gas and fertilizer and says it may fuel moving
some of his acres from corn to beans.
The question isn’t which of these farmers is right. The question is how many feel
the near-magnetic, ethanol-driven pull of corn demand and how many feel the
sucking sound from their checkbook as fuel and fertilizer costs mount.
While the result won’t be known until the rains subside and planting ends,
analysts say Iowa likely won’t change its corn-soybean mix very dramatically.
“I don’t think we’re going to see much movement in Iowa,” says John Askew, a
Pottawattamie County farmer and president of the Iowa Soybean Association.
“It’s still a local decision, agronomically.”
If that assessment of little change holds true it would make Iowa different from
some other states, where the USDA predicts major shifts from corn and wheat
toward soybeans.
“It’s the relative price of corn and beans and the relative yields that will
determine this,” says Bob Wisner, Iowa State University agricultural
economist.
For years, Wisner explains, Iowans preferred a 50-50 corn-bean rotation but
planted more corn because of the need to keep a federal corn base for their
farm-program payments. When that was no longer necessary, the mix moved
closer to 50-50.
For example, in 2001 Iowa farmers planted 51.5 percent of their row-crop acres
to corn and 48.5 percent to beans. But, the combination of poor bean yields,
market prices and fear of soybean rust pushed the figures to about 56 percent
corn to only 44 percent beans last year.
The March 31 USDA report showed only a slight change — to about 55 percent
corn and 45 percent beans.
Some of that could switch back.
At one end of the spectrum you have Main, who says his rotation is normally twothirds corn and one-third beans. For this year, he was planning on moving to a
rotation of 60 percent soybeans and 40 percent corn. But, since the March 31
report, he has seen the price of corn jump and the price of beans drop.
“I am thinking of going back to more of a 50-50 corn and soybean rotation,” he
says.
He expects a moderate increase in the number of soybean acres in his area,
thanks primarily to high fuel and fertilizer costs.
Steve Johnson, Iowa State University Extension farm management specialist,
says many of the farmers he works with see the long-term demand and price
outlook for corn as good enough to overcome higher production costs.
“It’s the farmers who are in tune with marketing who are going to make the move
(to corn),” Johnson says.
But, Johnson and Wisner add weather and spring planting conditions will be
major factors in determining Iowa’s mix of corn and beans this year.
For many farmers, the inputs are purchased and, in some cases, they’re already
applied. Those farmers have locked in acres to corn. But, for the remaining acres
the market is trying to buy corn ground since the March 31 report, pushing corn
prices higher and bean prices lower.
On the other hand, input costs remain very high. For some farmers who may
have cash-flow problems or who don’t deal extensively with futures contracts or
who just believe in a low-input approach, beans are still looking very good.
For a few of those, it will depend on how wet and late the planting season is.
The bottom line is analysts might not have a definitive feel for the situation until
after planting and the USDA issues its late-June crop report.
Between now and then, the market waits nervously.