Soybean acres will likely increase in the coming years as soybeans become more financially competitive with corn and to meet the increasing demand for protein. That's what grain and livestock experts told farmers attending the Iowa Farm Bureau's two-day economic summit in Ames last week. Farmer-leaders of the Iowa Soybean Association who attended the meeting agreed with that projection.
During livestock, crop and weather outlook seminars agriculture analysts predicted corn prices will settle back to the mid-$4-per-bushel range in years ahead -- down from $6 to $8 per bushel farmers have enjoyed in recent years. Experts said Chinese demand for soybeans will continue to remain strong and pork and poultry numbers are on the rise, which means additional soybean meal usage. This all adds up to more soybean acres in the future and many farmers returning to a true soybean-corn rotation.
"Based on market conditions, soybean acres should continue to trend upward," said Ross Korves, an economic policy analyst with Pro-Exporter Network. According to the June USDA Acreage Report, Iowa farmers planted an estimated 9.5 million acres of soybeans this year. That's up from 9.35 million acres the previous two years. USDA data shows Iowans planted 11 million acres of soybeans in 2001.
Profit potential of soybeans is shaping up to be more competitive with corn for planted acreage
Regaining 1.5 million acres lost since the beginning of the last decade will ensure the important soybean processing industry remains in the state, notes Tom Oswald an Iowa Soybean Association board member and farmer from northwest Iowa. "We need a consistent and reliable supply of soybeans, which keeps that economic engine running and in place," says Oswald, who attended the summit and farms near Cleghorn. "If that should start to sputter, our competition from around the world will increase their production of soybeans, making it hard for us to restart."
Korves expects soybean prices to hover in the $11 to $12 per bushel range in the next few years. Couple that with the expected reduction in corn prices, and he says the profit potential of the two crops will be fairly similar.
Korves, who formerly was an economist for the American Farm Bureau Federation, says the expected reduction in corn price is mainly due to ethanol production leveling off in future years. Ethanol was the main reason corn prices shot up dramatically. Increased corn yields and corn production in southern states and North Dakota and countries like the Ukraine are also playing a role, he says.
Strong soybean exports along with increased use in the U.S. will help boost soybean profitability
Pro-Exporter Network predicts U.S. soybean exports will increase by 41 million bushels during the 2013-14 marketing year to 1.375 billion bushels. Soybean crush will jump by 45 million bushels to 1.675 billion bushels. "This is a good opportunity for soybeans," Korves says. "We have pushed up corn acres and corn prices in recent years and we've run into a price problem. Now, more profitability is returning to soybeans."
Grant Kimberley, ISA director of market development, recently returned from an ISA-led trade mission to China. He says the world's most populous nation "will continue to buy more soybeans, corn and pork." Kimberley farms with his father in central Iowa and is optimistic that Iowa can grow more soybeans.
John Anderson, deputy chief economist for the American Farm Bureau, says retail demand for meat is "OK" despite prices for almost every species at or near record levels. He says pork and poultry production is expected to increase 2% to 3% in the near future. According to USDA, there were 20.4 million hogs and pigs in Iowa as of June 1 and 52.5 million layers in May. "This should be a positive for soymeal demand," notes Anderson. "High production of hogs and poultry will be a positive for the soybean market over the next several years."
Beef production has declined in recent years, he adds. There were 3.85 million cattle and calves in Iowa as of Jan. 1, down 50,000 head from the previous year, according to USDA. Anderson expects beef production to decline a little more over the next year or two before rebounding.
Iowa will have to import corn because this year's crop won't be big enough
Korves says Iowa, the nation's leading corn production state, will have to import corn this coming year because the 2013 crop won't be large enough to meet demand. Ethanol plants are returning to full production and livestock operations are growing and need more feed. It's a rare situation for Iowa to import corn but this year's corn crop in Iowa has been hurt by flooding and delayed planting, and last year's crop was smaller than expected due to drought.
This year's corn forecasts are running at a reduced 149 bushels an acre, better than last year's 137 but far lower than the goal of 180 for a state average for Iowa, says Korves. As it stands now, Iowa is expected to come in below the projected national average of 152 bushels per acre. "A whole lot of people are worried about what is happening in Iowa this summer," he says.
Drop in corn prices has brought ethanol plants back toward full production
A drop in corn prices in recent months has brought ethanol plants back toward full production and livestock operations, with the exception of cattle, are expanding at least modestly. That increases demand for corn. Korves says Iowa will likely end up importing 221 million bushels of corn from other states. Iowa is project to produce around 2 billion bushels of corn in 2013.
No bordering state is in Iowa's predicament. All will end up with net exports of corn, from 584 million bushels leaving Illinois to 63 million shipped from Wisconsin. With Iowa using so much of its own corn, the nation now looks to North Dakota to help build reserves. But that state left 4.4 million acres unplanted this spring due to wet weather, far more than Iowa's estimated 200,000 to 400,000 unplanted acres, due to weather difficulties. "The Dakota number is astronomical," says Korves. The 4.4 million acres is equivalent to one-fifth of North Dakota's 22 million crop acres.