The high price of corn, which is projected to remain in the $3.50 bushel range through the 2008 growing season, has gotten the attention of farmers in the Southeast.
Some land previously planted to peanuts, soybean, tobacco and cotton will be planted to corn. Though cotton acreage will take the biggest hit, the whole of Southeast agriculture will be affected by corn prices and the current furor over ethanol production from grain.
Latest estimates (March 1, 2007) project a decrease in cotton acreage across the South in excess of 1.5 million acres. The impact on Southeast agriculture will be dramatic, but there are questions about the longevity and profitability of these changes.
Where the acreage will go is the big question in the Southeast. Most of the cotton acreage is expected to go into corn. Projections by a number of sources peg the 2007 corn crop in the Southeast to increase by 28.5 percent. An increase of that size would take up more acres than is being projected to be lost to cotton in some states.
For example, if all the projected increase of 375,000 acres of corn in Georgia came from cotton acreage, this would require a loss in cotton acreage of more than 25 percent.
In North Carolina, if all the extra 180,000 acres of corn projected in 2007 came from cotton, this would create a loss of nearly 25 percent of the cotton acreage, compared to 2006 harvested acres. Clearly, some portion of the projected increase in corn in the Southeast will come from somewhere other than cotton.
“In the Carolinas we expect two-thirds or more of the acreage going out of cotton will be planted in corn,” says Gary Adams, an economist and analyst for the National Cotton Council. Adams says a recent NCC survey indicates the switch from cotton to corn is more prevalent among large acreage cotton farmers.
Projected cotton acreage reductions across the Southeast include:
- Alabama, 103,000 acres.
- Georgia, 328,000 acres.
- North Carolina, 201,000 acres.
- South Carolina, 72,000 acres.
- Virginia, 33,000 acres.
Corn acreage across the Southeast in 2007 is projected by state to be:
Alabama, 310,000 acres, up from 165,000 acres in 2006.
Georgia, 600,000 acres, up by 375,000 acres in 2006.
South Carolina, 380,000 acres, up from 299,000 acres in 2006.
North Carolina, 920,000 acres, up from 740,000 acres in 2006.
Growers in South and North Carolina started planting corn in mid-March in part due to unusually warm weather across the region, and also to allow time to plant cotton, peanuts and other crops. Planting too early, and with too little planning can be a recipe for disaster, and is one of several factors creating some concern for the yield and quality of the 2007 corn crop in the Southeast.
Though corn seed is not in short supply in most areas, many growers find seed from their first, second and third choices of varieties are gone. The combination of planting less than optimum varieties on land that is not well suited to corn, as is the case in many parts of the Southeast, plus a lack of irrigation is almost certain to drive yield averages down.
Corn yields in the Southeast have averaged from 120-135 bushels per acre over the past three years.
While the South may well increase corn acreage by 28.5 percent in 2007, it is not likely that will come close to corresponding to a 28.5 percent increase in corn production.
Nationwide, the increase in corn acreage is expected to come from soybeans, but soybeans are not a major crop in the Southeast, except for North Carolina, where over a million acres of beans are grown annually.
In the Southeast's largest soybean producing state, North Carolina State University Soybean Specialist Jim Dunphy says soybean acreage is expected to remain close to 2006 plantings, possibly up slightly. The increase in winter wheat plantings across the Southeast indicate an increase in double-crop beans, but Dunphy says most of that increase in North Carolina will come from full-season soybeans.
While some are predicting the U.S. corn crop will approach 90 million acres, University of Illinois Ag Economist Darrell Good says based on the need to keep corn stock to use ratio in the 6 percent range, U.S. corn producers should produce 87.8 million acres — based on an average yield of 154 bushels per acre. While new corn acres in the Midwest may reach 154 bushels per acre, it is highly unlikely many Southern states will produce corn at that level, pushing the need for more corn acreage up — possibly to 90 million acres.
The last time U.S. growers planted over 90 million acres of corn was in 1944. Georgia and Texas, alone, planted nearly 10 million acres of corn during the last years of World War II. A sizable amount of the land planted to corn during those earlier decades is no longer in agricultural production.
By comparison, in 2006, Georgia corn producers planted 280,000 acres and Texas had 1.75 million acres. Despite shifts of large acreage from cotton to corn, and on a lesser scale, peanuts to corn, the majority of total corn production will still have to come from traditional grain production states in the Midwest.
The high cost of corn, driven primarily by the demand from ethanol plants, has not significanlty affected export markets for U.S. grown corn.
The USDA expects U.S. corn exports during the current marketing year to reach 2.25 billion bushels. At that level, exports would be 103 million bushels larger than shipments of a year ago and at the highest level since 1989-90.
“Despite the higher cost of corn, we have seen no decline in demand for export,” says Dean Hill, a commodity trader with Interstate Commodities in Orange Park, Fla. “At some point price will have to affect exports, but right now we don't see it,” he adds.
Historically, marketing year U.S. corn exports have exceeded 2 billion bushels only 8 times. Prior to last year, exports had not exceeded 2 billion bushels since 1995-96 and had languished in the range of 1.5 to 1.98 billion bushels.
Peanut acreage will likely be affected to some extent by increased corn production in the Southeast in 2007. However, peanut acreage peaked in 2005 and 2006 saw a dramatic reduction in acreage, especially in Georgia and Texas.
Peanut contracts for 2007 have been good, which has stimulated an increase in acreage in Virginia. In other traditional peanut-producing states, acreage is expected to drop less than five percent.
Peanut growers traditionally grow corn as a rotation crop, though cotton has become the standard rotation crop in the past few years. It is likely that some peanut growers will further reduce planned peanut acreage and plant that land to corn.
The continued controversy over peanut butter will likely create an interest among growers to look for alternative crops.
How many acres of peanuts go out of production in favor of corn is not so much a question as is how much of the best peanut producing acreage will go to corn, says Tyron Spearman, long-time peanut marketing specialist. Spearman contends that much of the best irrigated land, traditionally used to grow peanuts, will go into corn production. The loss in production, he says, may not accurately reflect the loss in acreage.
With seed already in the ground in parts of the Southeast and land preparation going full scale, the mystery of the impact of consistent high grain prices on agriculture in the Southeast will begin to unravel. As is usually the case, the big determining factor will likely be weather.