As low prices render corn and soybeans unprofitable in the United States, farmers are nonetheless expected to grow more of the country’s top two crops this year as they scramble to stay solvent, a Reuters poll of analysts indicated.
“With the coming year, you can’t make money growing anything. You might be able to eke out a little income in corn, if you can get your costs down,” said Roy Huckabay, an analyst with the Linn Group, a Chicago brokerage.
Chicago Board of Trade new-crop December corn futures settled on Tuesday at $3.86 per bushel and November soybeans at $8.82-1/4 a bushel, both below the cost of production for some growers.
The average estimate of U.S. 2016 corn seedings in a survey of 20 analysts, including the U.S. Department of Agriculture’s (USDA) own early projection, was 89.6 million acres, up 1.9 percent from 2015.
For soybeans, the average seedings estimate was 83.3 million acres, up 0.8 percent.
The USDA will release revised forecasts this week at its annual two-day Outlook Forum.
Part of the increase in both crops reflects an expected return to production on more than 6 million acres where excessive rains prevented planting in 2015.
Some acres are likely to be switched to corn and soy from crops like wheat and cotton, whose projected returns are even worse.
Dale Durchholz, senior market analyst with AgriVisor in Bloomington, Illinois, who like the USDA expects a drop in overall acreage, says farmers will be more selective about planting.
“You might take a chance on your higher-quality land. But if I farm 1,000 acres and I’ve got 100 that are not great, I let those go,” Durchholz said.
No Obvious Winners
Nearly all the analysts expect a drop in total wheat plantings, reflecting poor projected returns. The average forecast was for 52.4 million acres, down from 54.6 million in 2015. The USDA has already pegged plantings of winter wheat, which was seeded last autumn for the 2016 harvest, at 36.6 million acres, a six-year low.
Spring weather will play a big role in determining the final acreage mix. But on paper at least, none of the major U.S. crops looks like a winning ticket this year, even with tumbling energy costs giving farmers a break on fuel and fertilizer expenses.
In North Dakota, the top U.S. wheat state where the cool and dry climate also allows growers to plant a variety of specialty crops such as canola and flaxseed, projected returns in some areas are negative for nearly everything.
“(Farmers) are really scrambling, trying to figure how they can make a dime,” said Andy Swenson, a farm management specialist with North Dakota State University.
The USDA this month projected net farm income for 2016 at $54.8 billion, the lowest since 2002.
“If folks had a pretty risky balance sheet going into last year, and got an operating loan, it’s going to be that much tougher going into 2016. And it could be the end of the line for some guys,” Swenson said.
Globally, markets are amply supplied with grain, a factor that has depressed CBOT prices.
“The market keeps trying to go lower to tell them, ‘don’t plant,'” said Arlan Suderman, chief commodities economist for INTL FCStone. “But the farmer is going to plant, because how he survives over the centuries is to be an optimist.”