A number of factors are influencing whether and how much corn and soybean acreage will expand in 2012, according to Dr. Darrel Good, professor of agricultural economics at the University of Illinois. Although domestic demand prospects for corn remain mixed, Good reported, he sees current demand being very strong.
Ethanol production continues to exceed the pace of a year ago and record hog and cattle prices, along with large feedlot inventories of cattle, support feed demand. Reduced broiler production; prospects for fewer cattle on feed in 2012; and the upcoming expiration of the blender tax credit for ethanol may point to weaker domestic demand in 2012. For soybeans, the pace of the domestic crush was very slow in the first two months of the marketing year, reflecting a slower pace of meal and oil exports.
While the markets will continue to reflect changing demand prospects for the 2011 crop, the potential size of the 2012 U.S. corn and soybean crops will also begin to have more influence on the market as the new calendar year begins. Prospects for the 2012 crop begin with expectations about planted and harvested acreage for all crops and for individual crops. Anticipating total planted acreage is made difficult by the fact that planted acreage varies considerably from year to year. In general, an increase in total acreage is expected next year because of the large area of preventive plantings in 2011. Preventive plantings are cover crops, such as buckwheat or oats, to help control erosion.
USDA’s Farm Service Agency reported 9.6 million acres of preventive plantings in 2011, up from 6.9 million in 2009 and 4.2 million in 2008. However, the change in preventive plantings is not closely correlated to the change in total planted acreage. USDA’s National Agricultural Statistics Service estimated that planted acreage of all crops increased by 1.4 million acres in 2011 even though preventive plantings increased by 2.7 million acres. Harvested acreage of hay declined by 2.26 million, so that total crop acreage declined by only 860,000 acres, Good noted.
Another reason to expect an increase in crop acreage in 2012 is the net decline of 1.6 million acres enrolled in the Conservation Reserve Program in 2011. It is not clear how much of that acreage will be planted in the fall of 2011 or spring of 2012, but some of that acreage will likely come back into crop production. In addition to an increase in planted acreage in 2012, it is generally expected that a larger percentage of the acreage will be harvested in 2012 than in 2011. While harvested acreage estimates for corn and sorghum silage have not yet been made, it appears that unharvested acreage of all crops in 2011 was nearly 9 million acres larger than in 2010 and 3 million acres larger than in 2009. In addition, expectations about total acreage, the market will continue to form ideas on the outlook for acreage of individual crops.
Currently, futures prices for the 2012 corn crop are $.35 to $.45 lower than prices for the 2011 crop. Futures prices for the 2012 soybean crop are $.10 to $.25 higher than the prices for the 2011 crop. The price structure implies that an increase in U.S. corn production is expected in 2012. That increase is expected to begin with an increase in planted acreage. Acreage prospects for 2012 will unfold slowly, starting with the USDA’s January 12, 2012 “Winter Wheat Seeding” report and followed by the March 30, 2012 “Prospective Plantings” report.
Given the considerable uncertainly about 2011-12 marketing year consumption and 2012 production prospects, December corn futures should find some support near the early October low of $5.70 and nearby soybean futures are finding support near $11, Good concluded.
