Iowa Could Produce Whale of a Corn Crop

U.S. may plant largest corn acreage in 63 years; Iowa plans big jump too.

Published on: Apr 2, 2007

Farmers in Iowa and the U.S. say they'll plant more acres to corn and less to soybeans in 2007. The USDA Prospective Plantings Report issued March 30 is based on a survey of farmers in early March.
The report shows farmers plan to plant 90.454 million acres of corn in the U.S. this spring - up 12.1 million or 15% from acreage planted to corn last year. The average guess among private analysts prior to USDA's release of the report was for 88.061 million, an increase of only 9.7 million acres from 2006.

Farmers plan to plant 67.14 million acres of soybeans in the U.S. in 2007, down 7.4 billion acres from last year's plantings - an 11% drop. The price of corn has doubled in the last six months. The price of soybeans has moved up too, but not as much as the price of corn, as the two crops are competing for acres.

Largest corn acreage since 1944

Joe Prusacki is director of the Iowa Field Office for USDA's National Ag Statistics Service. He is based in Des Moines. "Overall for the U.S. this survey shows that the 2007 planted acres for corn are expected to be up 15% from 2006," he says. "Farmers intend to plant about 90.5 million acres of corn this spring. If realized, this would be the highest U.S. corn acreage since 1944."

In Iowa farmers expect to plant 13.9 million acres of corn in 2007. "That's up 1.3 million acres or 10% from last year," he adds. Iowa farmers have traditionally led the nation in producing corn, accounting for more than 2 billion bushels of production, in each of the last three years. If normal weather prevails in the 2007-08 crop year, the 13.9 million acres projected to be planted in Iowa should yield at least 2.3 billion bushels, based on recent trend yields.

"For soybeans, nationwide, the 2007 intended acreage is down 11%. Farmers intend to plant 67.1 million acres and if they indeed do that, this would be the lowest number of soybean acres planted in the U.S. since 1996," says Prusacki.

Iowa soybean acres to take big drop

"Iowa farmers plan to plant 9.2 million acres of soybeans and that's down 950,000 acres from last year. If realized, this would be our smallest soybean acreage since 1994 and our largest year to year drop in soybean acres ever in the state of Iowa." The next report that will be of significance is the June 29 USDA Planted Acreage Report, says Prusacki.

"With Iowa corn acreage projected at 13.9 million planted acres, that could be a whale of a corn crop this year," says Ray Jenkins, head corn merchandiser for Cargill at Eddyville. "The big acreage number sure hit the corn market hard after the report was released the morning of March 30."

"The market just wasn't prepared for a 90 million acre number combined with the growth in grain stocks. So we have two negative factors in the market. But we have one that could definitely be positive and that's the weather here in early spring, which looks to be cold and damp the first half of April. So we could soon be talking a completely different story in the market in the weeks ahead."

Expect more price volatility in 2007

In years past when the Corn Belt has seen the wetter springs, U.S. corn acres have declined by one to two million acres from March planting intentions. "This 2007 USDA Planting Intentions survey was done in late February and early March when corn futures prices were substantially higher than they are now. They were 20 to 40 cents higher than now," he notes.

What is he advising customers regarding corn sales now? "Lets see where things go, what the weather is doing," says Jenkins. "It's going to be a long year with a lot of price volatility. We haven't seen our last opportunity to sell corn for better prices than now. But it may take awhile to rebuild the market and get there."

Better for livestock, ethanol producers

There are three groups that should be happy with the March 30 Planting Intentions Report.
* First is the group of farmers who have sold corn ahead.
* Second group is the livestock sector. It now looks like they're going to get cheaper grain and lower feed costs.
* Third group is the ethanol producers. Ethanol plants now, with the rising price of oil and a lower projected price for corn, look like they're going to have more profit margin on every gallon they produce.

Thus, the corn price outlook, based on the USDA Planting Intentions survey is now better for the livestock and the ethanol industries than it has been in recent months. "Those corn users who look toward the future and plan ahead for pricing their feed needs for livestock and their corn needs for ethanol manufacturing, are going to be better off," says Julius Schaaf. He is a farmer from Randolph in southwest Iowa and is the incoming chair of the Iowa Corn Promotion Board.

Market analysts expect corn prices to go lower in the near future in reaction to the expected huge expansion in corn acreage in 2007. "Of course that could happen, but in the Northern U.S. there isn't any corn planted yet," notes Schaaf. "There is still time for people to change their planting plans somewhat."

Surprised by big jump in corn acres

Were you surprised to see the large increase in 2007 intended corn acres indicated in the report? Chad Hart, an economist at Iowa State University, keeps tabs on crop supply, demand and the price outlook. "With 90.5 million acres of corn intended to be planted in the US as indicated by the March USDA survey, that's quite a bit more corn than what USDA and other forecasters had been previously predicting for 2007 planting intentions for corn," says Hart.

Does he think this big increase in corn acres is real? "I do think it's real," says Hart. "It now becomes a question of weather and will we have enough seed to plant that many acres? We could yet see some adjustment in corn acres."

What about the reduced price? After the USDA report was released on Friday, corn prices went down. "Corn acreage made a much stronger play than was expected, as far as increasing the intended acres for 2007," notes Hart. "Does that mean the livestock and ethanol sectors should look at potential profitability because they'll be able to buy corn at a lower cost? Corn growers are trying to meet the demands of both the livestock and the ethanol markets and with cooperation from the weather they'll be able to do that."

What is the outlook for soybean prices? With the sharply higher corn acreage and sharply lower acreage for beans, the bean market will be squeezed somewhat. Won't beans have to move higher in price to attract more acres?

"I'm waiting to see how the weather holds out this spring and how many acres the bean market ends up pulling away from corn and back into beans. If these numbers are to change, it's likely that corn acres may pull back and soybeans might regain some of that acreage," says Hart.

Where are corn acres coming from?

Hart has studied the USDA report, looking at individual states. "The increase in corn acreage is coming all across the board," he says. "There is only one state in the report where you don't see either a maintenance of corn acres or an increase in corn acres. The increase in U.S. corn acreage is coming from the upper Midwest, southeast and basically everywhere when we look across the nation."

Planted acreage is definitely going up for corn in 2007 and farmers are finding more acres to pull into production. A lot of acres are coming out of soybeans, but also some from pasture and hay ground. Not a lot is coming out of CRP.