With soybean futures higher than $10, some farmers might be reconsidering their decision to plant corn. This spring, soybean futures have increased by more than $1 due to weather worries in South America and stronger than expected demand from China.
“This is huge—that’s a lot of bullishness in soybeans,” says Chris Hurt, professor of agricultural economics at Purdue University, concerning the current rally in soybeans. “Before this runup, we were looking at about $30 per acre more profit on soybeans than corn on average land.”
With today’s prices, the premium has jumped to $80 per acre for soybeans over corn.
It appears farmers are taking note. Matt Kellogg, a seed representative from Illinois, says he has been receiving late bean orders. “Those guys putting in new acres seem to be putting a lot of it into beans,” he says.
Bullish soybeans could mean fewer acres of corn than originally anticipated. Soybean prices are stronger than when farmers were originally surveyed, says Darrell Good, professor emeritus at the University of Illinois. He anticipates up to 1 million acres could move from corn into soybeans.
Right now, 30% of corn acres and 3% of soybean acres are planted across the country. Corn planted acres are 15% higher than this time last year. As farmers continue planting, Hurt says they should seriously consider making a bigger switch to soybeans.
“The market is begging farmers to plant soybeans,” Hurt says. “The market’s job is to determine acres. My personal view is that 2 million to 2.5 million acres could be switched to soybeans or spring wheat.”
USDA expects to see 93 million acres of corn in 2016 based on recent surveys. Switching even 2.5 million corn acres to soybeans likely won't have a notable affect on corn prices thanks to surplus. "Corn stocks to use (number of bushels left at the end of the marketing year) is about 14% which is the highest since 2008/2009 in the U.S.," Hurt says. World inventories for corn reached a 14 year high.
As farmers make--or reconsider their spring planting decisions, it’s important to evaluate each field’s productivity. In some soil types, corn might still pay out better, but higher soybean prices might change the equation in other fields. By crunching the numbers, farmers can make sure they maximize their returns in 2016.