A light rain falls over the fields of Winnebago County near the border between Illinois and Wisconsin, as Bernie Walsh explains how he sees the balance between corn and soyabean acreage this year.
As a “grower-dealer” a farmer who sells seeds as well as grows crops to boost his income – he knows a lot about the planting intentions of many farmers around his land. “A lot of them are planting more acres of corn,” says Mr Walsh, whose family has farmed here since 1883.
As for his own intentions for the spring planting season, he says he is “working towards having two years of corn and one year of beans, rather than 50-50”, referring to how long he keeps each crop in the ground before rotating them.
Mr Walsh’s forecasts point to a subtle shift away from soyabeans and towards corn in America’s breadbasket, which has implications for world grain and soyabean markets.
Farmers in Illinois are a bellwether for US agriculture, as the state is the largest producer of soyabeans in the country and among the largest in corn. Chris Hurt, an agricultural economist at Indiana’s Purdue University, says such a trend will cause production of certain crops to become concentrated in specialised regions, with the US becoming a larger grower of corn and a smaller producer of soyabeans.
At the same time, soyabean-producing countries in South America will become dominant in soyabeans.
“There will be greater regional specialisation in what each region of the world has a comparable advantage in,” he says.
US farmers are drawn to corn because it offers a higher yield per acre than soyabeans. There has been no significant improvement in soyabean yields in past five years.
Lou Faivre, who farms 2,500 acres of corn and soyabeans about an hour’s drive south of Mr Walsh, says: “Corn has been better in the long run. Two years ago we had the worst bean yields ever.” He points out that last year’s record US soyabean harvest was a result of expanded acreage under soyabean cultivation, not greater yields.
Nobody is predicting a big drop in soyabean production, partly because the crop is useful in adding nitrogen to soil and helps corn flourish if planted in a field formerly used for soyabeans. But some farmers feel soyabeans are becoming less attractive to some farmers because they have become more disease-prone, requiring costly spraying with fungicides and insecticides.
Mr Walsh this year started selling a new soyabean seed developed by Swiss agro-chemical group Syngenta that comes “pre-treated” with insecticides.
The discovery of Asian soyabean rust late last year in the US has added to farmers’ reluctance to expand soyabean cultivation.
By contrast, corn is benefiting from the emergence of ethanol as a renewable fuel.
The US government pays a subsidy of 55 cents per gallon for ethanol production as part of an effort to wean the US off reliance on oil from the Middle East.
Mr Hurt calculates that this subsidy adds $1.38 to the value of a bushel of corn – currently trading at around $2 – creating an incentive to switch to corn.
He believes that the likely increase in the use of ethanol as a source of renewable energy not only will spur the growth of corn in the US, it will also boost domestic consumption of corn, possibly reducing the amount of US corn available for export.
That, in turn, would make corn more expensive for the world’s biggest buyers of corn, especially China. “Corn is probably going to be somewhat more expensive in the next 10 years,” says Mr Hurt.
The US Department of Agriculture forecasts that by 2014, the ratio of land in the US planted with corn compared with soyabeans is likely to be 54 per cent and 45 per cent respectively, compared with 52 per cent and 48 per cent now.
However, Mr Hurt says this underestimates the structural shifts now underway. He points out that Brazil’s ability to compete with the US in corn is limited by its weaker road infrastructure, making it harder for Brazilian farmers to transport fertiliser to corn fields and thus boost corn acreage.
“I would put that [ratio] more to 56 per cent corn and 44 per cent beans,” he says.
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