Mark Tuttle planted more soybeans and less corn on his northern Illinois farm this spring as prices for both crops hovered near three-year lows and lower soybean production costs gave him his best chance to make a profit in the country’s main soy-producing state.
He even planted soybeans in one of his fields for the second year in a row, breaking the traditional soybean-horn-twill rotation for field management. He and many other farmers hope to minimize losses.
Planting more soybeans at a time when demand from domestic importers and processors is nose-diving will only serve to push down prices, further inflate historically high global inventories, and erode already existing U.S. farm incomes. set to suffer the steepest annual decline ever in dollar terms.
But Midwestern farmers’ other main options — planting more corn or leaving fields fallow — could have resulted in even larger losses.
“There’s a better chance to make money in soybeans than corn right now,” Tuttle said. “But if we have another bigger harvest, prices will go down and that won’t bode well for the farmer.”
In March, the U.S. Department of Agriculture predicted that farmers will plant 86.5 million acres of soybeans nationwide this spring, the fifth largest crop ever. Some analysts expect soybean acres to increase by another million acres or more as heavy rains close the window for corn planting.
In nearby Princeton, Illinois, Evan Hultine has also increased soybean plantings and reduced corn plantings. High production costs, due in part to soaring interest rates, looked set to erode most or all of his corn yields, while soybeans remained marginally profitable, he said.
The farm’s profits will likely be the leanest in at least five years, Hultine said.
In an annual estimate of early-season crop balance, agricultural economists at the University of Illinois projected negative average returns to the state’s farmers for both crops, although losses would be smaller for soybeans.
NON-PROFITABLE CROPS
In northern Illinois, farmers could lose an average of $140 per acre for corn and $30 per acre for soybeans, with fall delivery prices of $4.50 and $11.50 a bushel, respectively, according to the analyses. However, actual yields vary significantly from farm to farm, depending on factors such as crop yields, the timing of grain sales, and whether farmers own or rent their land.
Fertilizer costs have fallen from last year’s highs, but crop prices have also fallen, while land costs remain high and lending rates for operating loans and equipment have risen, likely forcing farmers to cut back expenses, economists said.
When trying to reduce costs, farmers often prefer to plant soybeans rather than corn, because it requires fewer fertilizers and pesticides and seed costs tend to be lower.
High interest rates have been a particularly painful expense of late.
“If you borrow $700 an acre to plant a corn crop at 7-8%, you’re talking about real dollars just for the price of money. You can put in a bean crop much cheaper. Its interest cost per acre it could be half that,” Tuttle said.
MORE SOY, LESS CORN
An early spring forecast from the USDA predicted that soybean plantings would increase 3.5% this year, while corn plantings would decline 4.9%.
The expansion is expected to boost U.S. soybean inventories next season by more than 30%, reaching the highest level in five years and the sixth highest level on record, as demand from domestic and export markets slows down. is keeping pace with increased production, according to the USDA.
Now, rain-saturated fields in some areas could reduce corn acres and further expand soybean plantings, which, unlike corn, can be planted into June without significant risk to crops.
Cash prices offered for the upcoming corn and soybean crop have improved since early spring in Spencer, Iowa, where Brent Swart struggled to plant the last few acres of corn because the weather was too wet. But neither crop represents a profit at current prices.
Nearly three feet of rain in the past month, seven centimeters more than normal, has left his fields too soggy for field work. Swart estimates his remaining corn fields may not be fit to plant until after the June 1 planting deadline, when crop insurance benefits will begin to decline by the day.
The best option for Swart, in some of his fields, may be to make an insurance claim, saying he was prevented from planting due to the land flooding. Soybean prices remain about 40 cents a bushel below its estimated cost of production, he said.
“If you switch to soybeans, you potentially risk a loss. If you prevent planting, you’re facing a break-even scenario,” Swart said.
However, only farmers with severe weather problems will be able to apply for insurance.
Weather delays and favorable pricing relative to corn could boost soybean plantings by 500,000 to 1 million acres compared to the USDA’s latest forecast of 86.5 million, said Tanner Ehmke, chief economist for grains and oilseeds at CoBank.
“The market’s signal to the farmer right now is, if he has doubts about his acreage, send it to soybeans,” he said. (Reporting by Karl Plume in Chicago; Editing by Caroline Stauffer and Anna Driver)
