Farmers intend to follow up last year's record-high corn production by planting 8 percent fewer acres this spring, according to the U.S. Department of Agriculture's annual Prospective Plantings Report.
This early-season estimate, combined with increasingly strong demand for corn and fears of a delayed planting season, have many market watchers on edge.
The USDA's March 31 report revealed that growers plan to plant 86 million acres of corn this year - down almost 8 million from 2007 but still the second-largest area in almost 60 years.
More acreage is being shifted to soybeans, where acreage is expected to be up 18 percent to 75 million acres - up 11 million acres from last year.
Wheat acreage also is projected higher, with 64 million acres. That's up 6 percent from last year. Winter wheat is up 4 percent, while durum wheat is up 22 percent.
If this winter's cool, damp weather persists much longer - keeping Midwest farmers out of the fields - $13-per-bushel corn might not be out of the question, said Joe Victor of the commodity research firm Allendale.
"Farmers are getting a little bit antsy about wanting to get out in the fields," he said.
If planting is still running as much as 10 percent behind average by mid-April, trade will react positively to that, he said.
Most growers' decisions to shift out of corn is more agronomic in nature than economic, Mr. Victor said.
"Farmers want to get back to a more normalized crop rotation," he said in a Minneapolis Grain Exchange media teleconference shortly after the March 31 report.
Other motivating factors include skyrocketing input costs for corn, such as nitrogen and seed, and the fact that crop prices are strong across the board.
While he wasn't surprised by the acreage report, Mr. Victor said, he was taken aback by usage estimates.
The world's appetite for U.S. corn remains very strong on the weak dollar, and domestic use is projected at record levels.
In addition to exports and livestock feed, ethanol production is expected to require more than 4 billion bushels in the year ahead - up from about 3 billion bushels.
At an average of 155 bushels per acre, total corn production would be about 12 billion bushels, Mr. Victor said.
If supplies are short because of weather, he said, "this game is going to get real dicey."
He projects corn at about $6 a bushel this year, unless weather further delays planting or cuts into yields.
Soybean use also slightly exceeds the three-year average, at more than 900 million bushels. Mr. Victor expects prices to reach more than $9 per bushel.
Higher farm prices have prompted more landowners to convert acreage to row crops, he said. The total acreage of cropland is expected to jump about 2 million acres this year.
Many landowners are not re-enrolling acreage in federal conservation programs, and they are planting pasture and hay ground to corn or soybeans.
Double-cropping also is on the rise in certain states such as Indiana and Missouri. Double-cropped acreage is expected to be up about 2 million this year, Mr. Victor said.
Amid one of the most volatile trading seasons in its history, the Chicago Board of Trade last week expanded daily price limits for soybean, soy oil and corn contracts.
Since the start of this year, there have been several straight days of limit-up or limit-down moves in the Board's markets, fueled by tightening world grain and oilseed stocks and heightened speculative interest in commodities.
The USDA's planting report was closely watched by those in the livestock industry.
The hog industry has been bleeding red ink since last fall, and estimates of less corn would add insult to injury.
Adverse weather this summer, coupled with smaller corn plantings, could be catastrophic for many hog producers, said James Mintert, Kansas State University Extension economist.
"If we see crop production problems this summer, we could be setting the industry up for a train wreck in terms of losses," he said in a March 28 media teleconference. "We have not really done much in terms of adjusting usage levels."
Hog producers have begun to respond to their economic losses by reducing herd sizes, he said, "but it's pretty slow, pretty small."
More noticeable changes in production aren't expected until the end of this year.
The hog industry has lost about $280 million since Jan. 1. That's compared to a year ago, when it was $357 million in the black, said John Navlivka of Sterling Marketing in Oregon.
A fuller picture of the 2008 crop is expected to unfold in the next couple of weeks, with the release of two more big reports in early April - the World Agricultural Supply and Demand Estimates and the National Agricultural Statistics Service's first crop condition/progress report of the season.
"While these reports will affect the market, it is still a long time between now and harvest, and as conditions change, farmers will respond accordingly," said American Farm Bureau economist Terry Francl.
Mr. Francl said some farmers remain undecided about their final ratio of corn to beans, contingent on spring planting weather.
Heidi Clausen can be reached at [email protected].The Country Today
