The USDA Planting Intensions Survey indicates a reduction in soybean acreage in most states around the Southeast, but recent reports on over-supplies of corn and higher profit potential of soybeans may cause some growers to make late-season shifts.
Purdue University Ag Economist Chris Hurt says the market is in need of more beans and a number of growers in the Midwest, the heart of soybean production in the U.S., may be complying with significantly more acres than expected prior to May-June planting dates.
The soybean market has been buoyed by reports that soybean supplies relative to usage may be at their lowest since 1965, by the time the 2012-2013 marketing year is complete. Subsequently, soybean prices have jumped, surpassing $14 per bushel at one point in the early spring.
A major reason for the increased interest in soybeans is a projected glut in world corn supplies. Worldwide, corn production has increased by 250 million bushels and world soybean production has dropped by 575 million since the USDA planting intentions survey was completed.
From a farmer’s perspective, the change in supply, demand and price means soybeans have jumped over corn in profitability in some Midwest states.
Purdue University’s Hurst says,
“Our March crop budgets projected returns on corn $48 higher per acre than beans, but by April 10, the projected soybean return was $25 an acre higher than corn. After last week’s (mid-May) reports, soybeans’ price advantage surged to $78 an acre.
Low yield potential
The big holdup on planting high value beans in the Southeast seems to continue to be low yield potential. If 2011 production is a good indication, those concerns are at least partially justified.
Among the Southeast states, Virginia, North Carolina, Kentucky, Tennessee and Alabama all produced at least 30 bushels per acre. Virginia had a whopping 13 bushel per acre increase in yield, with a state average of 39 bushels of soybeans per acre.
By comparison, in the Midwest, most of the top producing soybean states in the Midwest had a drop in yield. Kansas led the way with 53.5 bushels per acre and a one percent yield increase. Iowa, at 50.5 bushels per acre was down slightly in production as were Illinois, Wisconsin and Ohio — each producing 46-47.5 bushels per acre.
Virginia Tech Soybean Specialist David Holshouser says the primary reason soybean yield increased by 13 bushels per acre from 2010 to 2011 is moisture and lack of moisture. A better way to look at this may be trend line yields since our yields vary so much from year-to-year, he notes.
Trend line yields for Virginia since 1995 are moving up an average of 0.44 bushels per year (versus 0.5 bushels for the entire USA). “Our trend line yield was at 27 bushels per acre in 1995 and at almost 35 bushels per acre in 2010,” Holshouser says.
“Keep in mind that although we averaged about 31 bushels per acre (1995-2010), I’ve only seen us yield near that average in 3 of the 15 years that I’ve been at Virginia Tech. It’s usually quite a bit greater or quite a bit less than average.”
“We can yield with the Midwest, but we have to have the rainfall. We don’t have the high water-holding capacity soils like they do in the Midwest,” he explains. As one grower recently stated, “We’re only 10 to 14 days away from the last rain to a drought.”
Virginia to maintain acreage
As to whether the improved yields last year and the high prices for soybeans this year will equate to more soybean acreage in Virginia, Holshouser says, “We’ll at least maintain our soybean acreage, and it may be up slightly.”
Holshouser says there was likely some cotton acreage shifted to soybeans in Virginia. “One agent just informed us he wouldn’t be putting in an on-farm cotton variety test because his No. 1 and No. 2 cooperators shifted these fields out of cotton and into soybeans,” the Virginia soybean specialist notes.
Charles Hall, executive director of the North Carolina Soybean Association, says the market for soybeans looks very promising. “We’ve got strength in the continued demand for feed grains from the livestock industry in the Southeast, and we’ve got increased collaboration among commodity associations to help keep our animal agriculture viable,” he notes.
“Cargill really likes North Carolina soybeans, and some things are happening in the state that may lead to more on-farm storage, which will improve the marketing situation for farmers,” he adds.
Hall, who has been a staunch proponent of building a strong soybean export market in the Upper Southeast, says export potential for beans is also promising.
“Soybeans are the No. 1 export crop for the U.S. China is a big customer, and Indonesia, Malaysia, Japan and Taiwan are also major buyers. The soybean checkoff is putting a lot of emphasis on serving these customers. Their annual purchases are helping elevate the price of beans,” he says.
For beans originating in the Southeast, a lot depends on when the shippers find the basis favorable. “The margins are so tight the traders come shopping for beans when the basis is favorable, and hold off when it is not,” Hall says.
Highly regarded Economist Richard Brock, speaking at a winter meeting of the Virginia Grain Growers Association predicted a surge in soybean interest, if not acreage. “The expected long ride with high corn prices may be shorter than most are forecasting and the fall may be more severe.”
Brock admits some of his peers think he is over-reacting to economic indicators and too quick to pull the plug on high corn prices. However, recent developments in soybean prices, reports of excess corn worldwide and a high demand for more soybeans, seems to indicate his prediction was right on the money.