The US Department of Agriculture (USDA) will release their 2019 Agricultural Baseline Projections Report this coming February. Every November, however, they provide a sneak-peek at selected tables. We’ve found three Ag media outlets that provided analysis on the numbers, and what they’ve found isn’t entirely unexpected. Most farmers know that things will be shifting more to corn in 2019, but how much? What are analysts saying about these preliminary USDA projections?
Corn is King
Chuck Abbott of Successful Farming proclaims “Corn to Be King Again” for 2019. USDA predictions say it will become the most widely planted crop, increasing in acreage by 3%. Soybean acres are anticipated to drop by 7%, and wheat acreage is predicted to be up 7%.
Record corn plantings in 2019 have the potential to yield 14.93 billion bushels, the second-largest ever. Soybeans yields are predicted to be 600 million bushels less than 2018, and wheat is predicted to yield 2.06 billion bushels.
Early USDA projections have corn prices strengthening, and soybean prices improving only marginally. Based on nationwide expenses, net returns over variable costs mean $344 an acre for corn, and $273 an acre for soybeans.
The USDA expects planted corn area to be ahead of soybeans by 9 or 10 million acres through 2023. They soybean carryover for 2018 is expected to be 885 million bushels. The USDA predicts that it will take six years to get that down to 300 million bushels.
A Shift is Happening
Krissa Welshans of Feedstuffs spoke with Chad Hart about the USDA’s early projections. He’s an agriculture economist at Iowa State University. Hart says that in normal years, the projections stay pretty close to the previous year. That’s not the case for 2019.
“Given the trade dispute with China and the lingering tariffs between the U.S., Canada, and Mexico that were not part of the USMCA, there are plenty of items to create significant movements in U.S. agriculture. And, the analysts at USDA expect U.S. farmers to make sizable adjustments to their land allocations in 2019,” Hart noted.
US farmers are expected back away from soybeans. Corn and wheat will make up much of the difference, but barley and oats plantings are anticipated to increase slightly. Overall though, planted area of the eight major crops is predicted to decline by a million acres. The gains in corn, wheat, barley and oats won’t offset the soybean loss.
Todd Hubbs of Successful Farming says that shifts in principal crop acreage have been occurring for the past decade. Increased Renewable Fuel Standards and increasing growth in soybean imports by China had inclined growers to plant more corn and soybeans at the expense of wheat and other small grains. As the margins of corn and soybeans get tighter things should start to swing back the other way, with more farmers planting wheat, small grains and cotton.
How much things swing depends a lot on what happens with corn and soybean prices between now and planting time.
Criticism of USDA Preliminary Projections
Joel Karlin, a DTN contributing analyst believes that some people might think the USDA estimates for 2019 corn acreage are too low. But the projected prices for 2019’s fall delivered crops paired with estimated corn and soybean returns means that both crops have negative returns- but corn will lose less money than soybeans.
Another important point Karlin makes is that the 2018 harvest was particularly late this year throughout much of the Midwest. A lot of fall tillage and fertilizing hasn’t been done there. That might limit the amount of corn acres in 2019.
Most corn and soybean growers will turn a profit this year, thanks to Trump’s tariff payments and record-breaking yields. Next year, however, might be a different story. Losses are likely, even with very high yields. The USDA is predicting that growers will start to shift their acres from soybeans to corn, wheat, cotton and other small grains. They predict corn margins will be better. How much things swing will depend a lot on what happens with corn and soybean prices over the next several months.
Read more about the “Unpredictable Soybean Markets” and how this is influencing planting decisions for 2019.