Near record corn production in 2008 is expected despite the fact farmers intend to plant fewer corn acres nationwide as indicated by the Prospective Planting report released today by the U.S. Department of Agriculture.
A delicate balance of good weather and higher yield trends due to technology will be key to cinch the difference between corn demand and actual production since planting intentions are down 8 percent from 2007’s acreage.
The report says farmers intend to plant 86.014 million corn acres nationwide this year, which is the second-highest planted corn acreage on record. If the average trend yield of 155.5 bushels per acre is realized, corn producers would be on track to produce approximately 12.3 billion bushels in 2008 – the second-highest production ever. Yields have increased by an average of 2.2 bushels per acre per year in the last 10 years. Efficiencies of production, management and technology have improved, maximizing how much corn is produced per acre.
In South Dakota, producers indicated they would plant 4.6 million acres of corn in 2008, down from a projected 4.9 million acres at this same time in March of 2007. South Dakota producers harvested 4.5 million bushels of corn in 2007.
High input costs for corn and crop rotation considerations may have motivated some farmers to plant fewer acres to corn. However, demand and competition for corn could create a profitable marketing scenario, and in fact the price ratio between corn and soybeans often favors growing corn over soybeans.
“South Dakota producers are responding to the marketplace with their planting intentions and these numbers clearly refute the arguments out there that corn is taking acres away. As with any management decision, producers really need to push a pencil to the economics of growing one commodity over the other, and not make the assumption that because input costs are higher, a lower net return is inevitable,” said Bill Chase, president of the South Dakota Corn Growers Association.
In a recent report printed in the South Dakota Corn Utilization Council publication, a comparison is made between planting corn versus soybeans. For example, if you compared a possible 140 bushel corn yield at a value of $5.00 per bushel to a 45 bushel soybean yield valued at $11.80, the difference would be $40.00 per acre greater revenue over direct costs for corn. This is based on an average direct cost of $279 per acre for corn and $150 per acre for soybeans.
“Corn growers have experienced high demand in all markets recently: exports, ethanol, consumer and livestock,” said Chase. “Today’s USDA report shows there will be an appetite for corn going into the growing season and producers will likely be incentivized by this scenario to plant any uncommitted acres to corn or even change their rotation to corn after corn to maximize returns.”
It’s important to realize that no seed is in the ground yet and there are many other external factors, such as weather, that affect planting decisions and crop production.
“We won’t know what actual plantings are until USDA’s acreage report at the end of June,” said Chase. “Historically, corn acreage projections have increased from the March Prospective Planting report to the actual planted acreage report in June – 3 million acres more last year. In fact, the March report has underestimated actual corn acres each of the last four years.
“The bottom line is, the market is demanding corn and South Dakota producers are uniquely positioned to meet that demand this growing season,” said Chase.