Farmers Plan Biggest Crops Since 1984, Led by Corn

Farmers Plan Biggest Crops Since 1984, Led by Corn

U.S. farmers will plant the most
acres in a generation this year, led by the biggest corn crop
since World War II, taking advantage of the highest agricultural
prices in at least four decades.
They will sow corn, soybeans and wheat on 226.9 million
acres, the most since 1984, a Bg survey of 36 farmers,
bankers and analysts showed. The 2.5 percent gain means an
expansion the size of New Jersey, as growers target fields left
fallow last year and land freed up from conservation programs.
Crop prices, some of which reached the highest averages
ever in 2011, bolstered the economies of Midwest growing states,
sent net farm income up 28 percent to $100.9 billion and pushed
the value of farmland to a record $2,350 an acre, the U.S.
Department of Agriculture estimates. Global food costs are down
11 percent from a peak a year ago as grain output rises from
China to Canada, United Nations data show.
“There is unlikely to be any ground that won’t be planted
this year,” said Todd Wachtel, a 40 year-old who farms about
5,700 acres in Altamont, Illinois, and plans to expand his corn
fields by 21 percent when seeding begins in early April.
“Farmers know that they have to plant more when prices are high
because they may not last.”

Production Forecast

A bigger harvest in the U.S., the world’s largest exporter
of all three crops, will help compensate for shortages in the
current crop year. Drought damage in Brazil and Argentina will
probably spur the USDA to cut its global and U.S. grain-supply
forecasts for the current season on Feb. 9, a separate Bg
survey of as many as 25 analysts showed. The USDA’s first
forecast for the year 2012-2013 crop year will be Feb. 23.
Farmers will sow corn, used to feed livestock and make
ethanol, on 94.329 million acres this year, up 2.6 percent from
last year and the most since 1944, according to the Bg
survey. Soybean fields may expand 0.4 percent to 75.309 million
acres, the fifth-most ever. Both crops are harvested after the
current season ends on Aug. 31. Wheat in the season that begins
June 1 will reach a three-year high of 57.233 million acres, up
5.2 percent, the survey showed.
Corn may rise 7.1 percent to $6.90 a bushel in six months
because of the damage in South America, before dropping to $5.25
in a year as U.S. farmers increase supply, Goldman Sachs Group
Inc. said in a Feb. 2 report. Corn for delivery in December,
after the harvest, fell 0.1 percent to $5.8075 today, 9.9
percent below the March contract on the Chicago Board of Trade.

Foresight Commodities

Wheat may tumble 18 percent to $5.50 by July and soybeans
may drop 17 percent to $10.20 a bushel, analysts at commodity
broker Allendale Inc. in McHenry, Illinois, said Jan. 21.
“The area is available to have huge crops this year,”
said Paul Meyers, a vice president at Foresight Commodities
Services Inc. in Long Valley, New Jersey, and the former head of
grain-market analysis at the USDA from 1974 to 1983. “We are
headed for a surplus-supply situation.”
Corn, soybean and wheat futures are down at least 15
percent since the end of August, helping to send the Standard &
Poor’s GSCI Agriculture Index to a 16 percent decline. The MSCI
All-Country World Index of equities gained 4.7 percent during
the period, touching a six-month high Feb. 3, while Treasuries
returned 2.5 percent, a Bank of America Corp. index shows.
World food prices fell to a 14-month low in December, led
by declines in grains, sugar and oilseeds, the UN’s Food and
Agriculture Organization said Jan. 12.

Monetary Fund

The USDA affirmed its forecast for moderating food costs
last month. Prices will increase 2.5 percent to 3.5 percent in
2012, below last year’s 3.7 percent gain, the agency said Jan.
25. The same day, the International Monetary Fund forecast a 14
percent drop in non-oil commodities this year, citing more
supply.
Farmers in the Midwest, the main growing region, are less
than two months away from planting seeds, and dry soils in some
areas could limit output. The most widely-held option on
December corn futures gives the holder the right to buy the
grain at $7.
“It’s been an abnormally warm winter,” said Alan Tiemann,
who is preparing to expand corn planting on his 2,000-acre farm
in Seward, Nebraska, by 15 percent. “That may not relate to
what’s going to happen this summer, but it keeps you on the edge
of your seat a little bit, wondering when the next moisture
event is going to happen.”
Corn averaged $6.79 in Chicago last year, the highest ever
and twice the level of the previous decade, exchange data show.
Soybeans averaged a record $13.21, 72 percent above the 10
previous years, while wheat’s average of $7.235 was the second-
highest ever and 57 percent more than the past decade.

Trading Commission

Money managers have been betting on lower wheat prices
since September, U.S. Commodity Futures Trading Commission data
show. They cut their bullish wagers on soybean and corn in two
of the past three weeks.
Floods, drought and freezes last year prevented planting of
the three crops on about 8.577 million acres, 28 percent more
than in 2010, USDA data show. An additional 1.84 million acres
that were planted failed to produce, more than double the amount
a year earlier.
Crop insurers paid out a record $9.1 billion last year to
cover the damage, and the bill may top $10 billion when all
claims are settled, Overland Park, Kansas-based National Crop
Insurance Services said Jan. 24.
A return to normal weather in 2012 would mean more
production from last year’s lost acres. The government also has
reduced the amount of land it pays farmers to leave fallow by
4.7 percent, adding 1.47 million acres that weren’t available in
2011, USDA data show.
Rising incomes allowed farmers to buy more land and the
extra seed, crop chemicals and equipment needed.

Profitable Industries

“Grain farming has been one of few profitable industries
for the past three years, and there will be a tendency for
farmers around the world to maximize acreage,” said Don Roose,
the president of U.S. Commodities Inc. in West Des Moines, Iowa,
who has been advising farmers and grain elevators since 1979.
“We have the potential to grow record world crops this year
that can swamp demand.”
Deere & Co., the world’s largest farm-equipment maker, will
report record net income of $3.14 billion this year, up from
$2.8 billion a year earlier, the mean of eight analyst estimates
compiled by Bg shows. Shares of the Moline, Illinois-
based company rose 14 percent this year. Monsanto Co., the
biggest seed company, will earn $1.9 billion, up from $1.61
billion, the mean of seven estimates shows. The St. Louis-based
company rose 14 percent in New York trading this year.

Farming Accounts

Land prices in Iowa, the biggest corn- and soybean-growing
state, averaged $5,600 an acre last year, three times the amount
a decade ago, USDA data show.
While farming accounts for 0.9 percent of the U.S. economy,
it has been among the fastest-growing contributors. The amount
of value added by agriculture in the four years through 2010
rose 42 percent to $132.6 billion, compared with 8.6 percent
growth for the entire economy, government data show.
U.S. exports surged as global economic growth boosted
demand for crops, meat and dairy products, while weather damage
disrupted supplies of everything from Russian wheat to Chinese
pork.
Shipments reached a record $137.4 billion in the year that
ended Sept. 30, with China the largest farm-goods buyer, USDA
data show. While the government expects a drop to $132 billion
in the current fiscal year, that still would be the second-
largest ever and 21 percent higher than when President Barack
Obama set a goal in 2010 to double all U.S. exports by 2015.

U.S. Unemployment

Unemployment in Midwest states was 7.9 percent in December,
tied with the Northeast as the healthiest job region. North
Dakota, Nebraska and South Dakota were the only states with
unemployment under 5 percent. The national rate fell to 8.3
percent in January from 8.5 percent in December.
Corn will lead the planting surge because it is the most
profitable row crop. U.S. mandates for alternative fuels have
led to an increased use of the grain to make ethanol, and rising
worldwide incomes are boosting meat consumption, increasing
requirements for livestock feed. Global production of beef,
veal,
pork, chicken and turkey will reach almost a quarter of a
billion metric tons this year, 62 percent more than two decades
ago, the USDA estimates.
An acre of corn will earn as much $150 more than soybeans
at current prices and normal weather, said Mike Wagler, 30, who
farms about 7,000 acres with his father in Montgomery, Indiana.
“Farmers have the capital to plant a big corn crop this
year,” said Wagler, who plans to sow 85 percent of his family’s
land with the grain compared with 70 percent last year. “We can
make more money raising corn than soybeans.”

North Dakota

In North Dakota, the largest producer of spring wheat,
farmers probably will plant record corn and soybean acres this
year as they use most of the 5.6 million acres that couldn’t be
planted in 2011, said Frayne Olson, an agriculture economist at
North Dakota State University in Fargo. Spring-wheat acreage
will remain steady, he said.
David Kopseng, a fourth-generation grower on 4,700 acres in
Harvey, North Dakota, said he will boost corn planting by 17
percent to 1,400 acres from a year earlier. in 2006, he didn’t
sow any of the grain. Improved seeds have boosted yield by about
40 percent in the past decade, making corn at least $50 more
profitable than wheat or soybeans, he said.
“We’re going to plant the most corn acres ever,” said the
47-year-old Kopseng. “I’ve been buying some more land and
renting more because of corn’s profitability. It’s a great time
to be a farmer in North Dakota.”