During the fall of 2006 the talk in farm circles focused on the demand for corn and how the market favored corn production. But in one short year, the tables have turned making soybeans the crop most in demand going into 2008.
Both crops, along with wheat, are likely to be profitable in 2008, said an agricultural economist with the University Of Kentucky College of Agriculture. But the price ratio between corn and soybeans definitely favors soybeans.
“Farmers will have to respond to the market,” said Kenny Burdine, UK agricultural economist. “It doesn't mean they should totally abandon their crop rotation, but there will be a shift toward more beans.”
The shift toward soybeans will be price-based, but it is also the logical crop rotation pattern on most Kentucky farms with full-season or double-crop soybeans/wheat typically planted following corn.
In 2007, Kentucky farmers and farmers across the nation responded to market demand for more corn with Kentucky farmers planting 295,000 fewer soybean acres and 320,000 more acres of corn.
Nationally, the result was a 21 percent increase in harvested acres allowing production to exceed the increase in use, giving the corn supply a slight cushion. At the same time, soybean acres and yields dropped, resulting in an 18 percent smaller crop in 2007 than 2006. Soybean use has been steady making for a very tight supply for the upcoming year and setting the stage for much higher prices in late 2007.
As a result, many soybean acres lost to corn in 2007 will likely return in 2008. In Kentucky, a number of those acres will be double-cropped soybeans following the winter wheat crop. Wheat prices are also strong, encouraging farmers to grow that crop as well.
Those acres were planted in October and early November, but the actual number is not yet known. Nationally, soybean production is likely to increase by four to seven million acres in 2008.
“Unless something drastically changes between now and spring, we won't see many continuous corn acres in 2008,” Burdine said.
Demand for corn, wheat and soybeans is expected to remain strong through 2008, and barring major weather problems, it should be a profitable year for grain producers, Burdine said.
Prices for 2008 corn and soybeans have been trading in the $4 and $10 range, respectively on the Chicago Board of Trade. With prices at these levels, it is not too early to price a portion of the 2008 crop, Burdine said. There are several options farmers have in forward pricing.
“But if anything was learned in 2007, it was that contracting too high a percentage, too early, can leave you worried about making delivery,” Burdine said. “So, since the crop isn't even in the ground, farmers need to be realistic about the amount of grain that is forward priced.”