COLUMBUS — With only a month and a half before spring, the competition between corn and soybean acres is heating up — and soybeans could be the favorite for many growers.
Global demand for soybeans and soy protein has resulted in record U.S. exports and a promising future. The U.S. Department of agriculture estimated U.S. soybean exports for the 2016-2017 marketing year at a record 2.05 billion bushels.
And the soybean ratio — or the return per bushel of beans over corn, is about 2.6 — the highest in decades.
“The incentive to grow beans, from a financial (bean-corn ratio) standpoint is the highest it’s been in 1989,” said Brian Burke, a consultant with John Stewart And Associates.
Burke spoke to farmers and agribusinesses Feb. 1 at the Ohio AgriBusiness Association annual meeting in Columbus, where he gave an update on the eastern U.S. cash grain market.
Like other experts, he said the coming weeks will still play a critical role in what the final planted acreage becomes — and so will the weather. The U.S. Department of Agriculture won’t release its planting intentions report until March 31, but Burke expects to see a decrease in corn acres, and an increase in soybeans.
Carl Zulauf, professor emeritus with Ohio State University, said soybean demand is growing around the world — and demand for soybeans in 2017 could rival the No. 1 importer, China.
Zulauf spoke to farmers Feb. 2, at OSU’s ag outlook meeting in Wooster. But while demand for beans is strong — he said all commodities continue to face tight profit margins — and farmers will need to do some pencil-pushing to stay in business.
“This (grain farming) is a cost of production industry,” he said. “It is not fun, it is not sexy, but the people who survive and thrive driver their cost of production down.”
Corn yield continues to increase more than 2 percent a year, with a U.S. average yield of 174.6 bushel per acre in 2016. Meanwhile, market prices have been on a downward trend, and input costs have gone up.
Keeping inputs down
By Zulauf’s calculation, a corn farmer can’t allow his input costs to increase by more than 1.5 percent, if he wants to stay profitable.
Tim Luginsland, an ag business consultant with Wells Fargo, said the markets are reacting to supply and demand. He said the population growth rate in the U.S. remains under 1 percent, while corn yield is growing by more than 2 percent.
“We’re producing more and more on the same amount of land,” Luginsland said.
His colleague, Lon Swanson, discussed some of the other challenges and opportunities ahead, including the three major agribusiness mergers underway: Dow and DuPont, Bayer and Monsanto, and ChemChina and Syngenta.
Swanson said companies are looking to merge so they can lower their own operating costs, and to keep their stock prices high.
If all there mergers are approved, he said the three companies could account for as much as 83 percent of domestic corn seed, 78 percent of global herbicides, and 65 percent of global insecticides.
“It’s putting a lot of power in fewer hands,” Swanson said.
He said there are pros and cons to mergers — which have been happening in agriculture long before these ones. He noted that mergers typically result in less competition, higher prices to farmers, and staff reductions at the companies that merge.
As profit margins get tighter, Swanson said farmers are trading down on seed traits and technology, especially on the outskirts of the Corn Belt.
He said this may be a good time to also revisit your historical data, and know what inputs and farm practices have worked well in the past, and maybe go back to using some of those.
Overall, he said the industry needs to “stay realistic with what we’re seeing,” and be willing to adapt to change.
Some other factors could play into the commodity markets — depending on the actions of the newly appointed Trump administration.
The new president took office Jan. 20, and has already issued a series of executive orders, and backed the U.S. out of the Transpacific Trade Partnership — a deal that would have included new trade opportunities with Pacific nations.
Zulauf said it’s difficult to know what the new president will or will not be able to do, and what impact his administration will have.
The stock market has soared since Trump took office, with the Dow Jones Industrial Average topping 20,000 points. Zulauf said he expects the general market will continue to grow, along with worker wages.
But he believes the ag economy may be in for a different direction.
“For the last 10 years, U.S. agriculture has outperformed the general economy; for the next 10 years, I think the general economy will out-perform agriculture,” Zulauf said.