The corn market’s consistent outperformance of soybeans so far in 2013 has helped cement expectations that overall corn planted area within the United States will see a year-over-year increase across all major corn-growing states at the expense of soybeans and other crops.
But there are some key states where soybeans have gotten the upper hand lately, both in terms of an acreage footprint and overall crop value, opening the door to a reduction in corn acres even in the heart of the traditional Corn Belt.
Most agronomists and agricultural economists cite corn’s superior return-per-acre profile as the chief reason why farmers across the Midwest will dial up corn seedings this spring and pare back the production of other spring-planted crops.
And certainly from a purely economical perspective corn does appear to have the upper hand when compared with the projected cost and revenue potential of other widely planted crops.
Ag economists at the University of Illinois — which runs one of the top agri-focused programs in the country — estimate that corn planted on top-tier land that also grew corn last season could yield a return of $571 per acre, while corn planted where soybeans were produced in 2012 could return $643 an acre.
In comparison, the projected return for soybeans on land that produced corn a year ago is roughly $445 an acre. Estimates for Iowa — the country’s top corn-growing state — are similar.
Even so, large-scale commodity crop growers base their planting decisions on more than just economic return potential alone, as crop rotation requirements, crop insurance mandates and general production risk diversification all contribute to the decision-making process.
This particularly applies to growers who farm ground that is less productive than that found across Illinois and Iowa, and where the bushels-per-acre estimates used in revenue forecasting are routinely lower and so can eat into prospective financial returns.
While it is true that each farm manager tweaks production decisions based on farm-level considerations, there is a tendency for growers to act in tandem in terms of crop production because their land shares similar attributes. This leads to widespread planting of the same crops across the same areas.
The corn market’s 100 per cent price increase over the past five years has also produced greater uniformity of crop production in certain areas and has led to certain states being increasingly defined by the production of that crop versus any other.
Iowa, Illinois, Nebraska, Minnesota and Indiana are often known as the ‘Big 5’ in terms of corn production, and together account for more than 50 per cent of the total corn-planted area and nearly 60 per cent of total U.S. production.
And when you look at the growth in the gross dollar-based value of the corn crop over the past 10 or so years, it is easy to see why growers in those states have proved happy to intensify corn production over that period.
Since 2002, the value of the corn produced in those ‘Big 5’ states has increased by more than 200 per cent from roughly $13.7 billion to $42.8 billion in 2012. That 2012 tally comes despite the disappointing crop yields that year amid drought conditions, and is down more than $5 billion from the all-time high recorded the year before.
That total compares starkly to the dollar amount received by growers of corn in the second tier of growing states within the United States — South Dakota, Kansas, Ohio, Wisconsin and Missouri — which was less than $14 billion in 2012 and topped out at less than $15.5 billion the year before.
Less productive soils account for the steep revenue differential seen, and are the chief reason why growers within that band of states may be tempted to cut back on corn-planted area in 2013 even as their counterparts in the Big 5 states continue to extend corn production.
Growers within second-tier states not only routinely record substantially lower crop yields per acre, but also often face higher overall production costs as they attempt to make up for natural soil deficiencies through heavy chemical and fertilizer usage.
Furthermore, due to poorer overall soil quality in those states, growers outside the Big 5 in general experienced much sharper yield reductions in the drought last year versus normal.
While growers across all states outside of the Big 5 can be considered serious candidates for cutbacks in corn plantings in 2013, there are three states that stand out as especially likely to favour soybeans over corn this year — Ohio, Missouri and North Dakota.
These three states ranked eighth, 10th and 12th in terms of average corn production over the 2008-12 period, and so are not inconsequential when it comes to contributing to the overall corn production total.
However, in terms of soybean output, they ranked sixth, seventh and eighth in 2012, and have made consistent increases in terms of overall soy output over the past several years.
Indeed, soybean-planted area in each state has been consistently higher than that of corn for the past 10 years at least.
The chief reason for this lies in the state-level overall value of the soybean crop relative to the corn crop, which in those states has been more or less equal to corn in recent years even though in other states corn’s overall value has been consistently above soybean’s.
Another soy-supportive factor has been the average crop yields recorded by those states in recent years, which on the whole have been closer to the national average in soybeans than in corn.
The fact that the soy crop’s value has been at least equal to corn’s in those states in recent years, combined with the area’s track record of delivering solid soybean yields, makes it likely that growers in those states will continue to dial up soybean production going forward.
At the same time, the recent experience of disappointing corn yields — along with the relatively higher expense of growing corn compared to soybeans — make it likely that corn area in those states could come under pressure in 2013.