Farm News
09-29-06
Markets bid for more corn, wheat acres
By RANDY MUDGETT- Managing Editor
The smartest, best farmers already know what they will raise next year while
sitting in their combines this fall. Most of those farmers are managing their
decisions with their checkbook.
And, it doesn’t matter if the farmer is located in North Dakota, Nebraska, Illinois
or Iowa, the main focus is unchanging for producers as price dictates his or her
actions.
The push-pull effect is working overtime now in the market as corn, soybeans
and wheat all struggle to maintain or add acres for the 2007 crop season. Many
producers have to decide now what actions (or lack of actions) they will take for
next year with their checkbook doing the talking.
‘‘We really have two phenomenons at work right now,’’ said Kelvin Leibold,
Iowa State University Extension farm management specialist for north
central Iowa. ‘‘The ethanol industry expansion and the biodiesel movement is
pressuring farmers to make decisions on next year’s production and Iowa
farmers will have to decide whether they can accept more risk by shifting acres
from soybeans to corn.’’
Steve Johnson, Extension farm management specialist from central Iowa,
said large farmers have already made their decisions for next year, pre-pricing
and selling portions of next year’s crop, likely corn that has been pre-sold in
December 2007.
‘‘I think we will see producers in the deep, rich, loamy soils of the Des Moines
Lobe make the move to more corn on corn,’’ Johnson said. ‘‘Especially those
farmers who have access to manure to lower crop inputs. This group of farmers
are in tune with the market and have already decided what to do next spring.’’
Johnson said soils with greater water-holding capacity, producers who have
access to animal manure for fertilizer, producers who are close to ethanol plants,
river terminals and feedlots and producers who are able to manage the
requirements of increased capital,machinery, equipment, labor, transportation
and storage are likely the ones who would make the switch to planting more corn
in 2007.
‘‘The bottomline is each farm will need to determine their own costs and risk
associated with growing more corn on corn,’’ Johnson said.
A University of Illinois study dated Sept. 15, 2006 by the Department of
Agricultural and Consumer Economics looks at the facts when producers
consider shifting acres. The study found that based on current market futures,
cost of production comparisons and relative revenue return, corn will be more
profitable to grow in 2007 and 2008, especially if your farm is located in north
central Iowa, central Iowa, central Illinois, southern Minnesota, areas that contain
some of the richest soils in the Corn Belt.
Johnson said even though the cost to produce corn is roughly $110 an acre more
than soybeans, producers who lock in a portion of their corn at near $3 a bushel
and meet many of the requirements needed to lower costs, will profit from the
move.
Leibold said as crop prices rise in light of the biofuels movement, producers know
the market must buy acres in order to get producers to raise the crop.
The scenario of the market attempting to capture more wheat acres for next
season may also steal acres away from soybeans. Many farmers have already
taken advantage of futures prices in wheat to lock up additional acres next year.
Johnson said some southern Iowa farmers will shift acres to winter wheat
because of the favorable price.
‘‘Wheat is a low cost grain to produce,’’ Leibold said, ‘‘and we will see many
farmers on dryland areas shifting back to wheat as moisture remains a concern.’’
The University of Illinois study also pointed out that most counties in the Corn
Belt increased corn acres between 2001 and 2005, many increased corn acres
by as much as 10 percent.