Drought Hangover To Continue

Farmers are starting to lay plans for next year's crop. Will we see more corn or soybeans in 2013?

Published on: Sep 28, 2012

As harvest heads into the homestretch, most farmers start thinking ahead to plans for next year's crop. By mid-October, most crop rotations are decided; seed and fall-applied fertilizer are purchased. But something is different this year.

Many Iowa farmers just experienced one of the worst droughts in a generation, points out Steve Johnson, Iowa State University Extension farm management specialist in central Iowa. Thanks to high market prices all summer and the potential for record large crop insurance indemnity payments, most farmers will still have a profitable 2012. However, there's a drought hangover likely to impact major decisions going forward.

CORN OR BEANS?: Despite record high corn prices in 2012, farmers are not necessarily going to plant more corn next year.
CORN OR BEANS?: Despite record high corn prices in 2012, farmers are not necessarily going to plant more corn next year.

"Drought gets in people's minds and lingers for years," he observes. "Most farmers have memorized the drought years that impacted them and the years that impacted their fathers and grandfathers." With the memory of 2012 in mind, despite record-high corn prices this year, Johnson doesn't believe Iowa and the Corn Belt will plant as many acres of corn in 2013 as in 2012. However, there will be some farmers who will plant more corn than crop rotations suggest they should.

So what about 2013? Will weather cooperate and will we see record planted acres and a bumper crop?
Over the next decade, global demand for corn is expected to grow 1.8% per year and soybeans 2.2%, respectively. However, it would take large 2013 planted acres in both the Southern and Northern hemispheres and near perfect growing conditions with trend yields or above to get back to normal global ending stocks.

Next year's planting decisions start now. "But some factors may take those decisions out of a farmer's hands," says Johnson. "While drought in 2012 impacted corn and soybean fields alike, the appearance of brown and dying drought-damaged cornstalks and much smaller ears was recognized early on. Regret for not rotating to more soybean acres in 2012 has been a topic of discussion since midsummer."

With 2013 on the horizon, high fixed costs of $300 to $500 per-acre for cash rent impacts crop rotation decisions. Corn may have the best way to assure revenue, despite what it may do to crop rotations, notes Johnson. Corn on corn requires more intensive management of corn crop residue and increases the likelihood for problems with disease, insects and weeds. Additional nitrogen will be required for corn, and there is more difficulty in getting accurate soil test readings following the drought.  

Expect more soybean acres in 2013, both in Iowa and nationally

Many Iowa farmers are not sold on corn-on-corn production, especially following a year like 2012. Although it's early to be making predictions for 2013, soybeans seem to be in favor agronomically among farmers in terms of planting plans, but the jury is still out on the economics. Many farmers want to get their crop rotations back in balance after planting more corn on corn in recent years. 

With historically low year-ending U.S. stocks very likely for both corn and soybeans by August 2013, any problems in global production could push farmers to plant more of one crop or another by spring. Late August and late September rains in 2012 across the Plains and Southern Corn Belt should increase the prospect for winter wheat acreage seedings this fall. Increased wheat acreage would increase the likelihood for double-crop soybean or grain sorghum acreage in the U.S. next year.

Keep an eye on Brazil and Argentina for possible weather problems
If soybean prices surge with any South American weather problems that may develop, the revenue insurance guarantee for soybeans grown by U.S. producers, which is determined by prices in the month of February, could make that crop even more attractive by spring as compared to corn.

"The prospect is dim for Iowa farmers to plant as many corn acres in 2013 as we did in 2012," says Johnson. But despite the drought hangover, high cash rents may force some farmers to plant more corn on corn than crop rotation and agronomic considerations suggest.

The bottom line: Know your costs of production and include economic, not just agronomic, decisions for 2013, he advises. Farmers need to evaluate their own individual circumstances. That includes everything from land costs, crop rotation issues, soil moisture prospects and 2013 price expectations.

For farm management information and analysis go to ISU's Ag Decision Maker site www.extension.iastate.edu/agdm and Extension farm management specialist Steve Johnson's site www.extension.iastate.edu/polk/farmmanagement.htm.