President Trump’s ongoing trade battle with China may have many farmers switching to other crops. With loss in exports to China, farmers may be forced to make new plans for next year’s harvest. What field changes might we see in the future?
Out with the Beans, In with the Corn
China is the top importer of U.S. soybean. However, our biggest customer has stopped buying the oilseed at a time when growers are gathering a bumper crop. As a result, farmers may begin planting more corn for next year’s harvest.
“Next year, we are probably going to see less soybeans and more corn because we have such a large carryover,” said Tim Brusnahan, vice president of consulting at Brock Associates. “We are at a point with trade negotiations with China, we don’t know when that’s going to end, we don’t know how long that’s going to take. It may take a while, so farmers will figure out what their best cropping opportunities are next year.”
Soybean stockpiles are expected to be so big farmers may not have a place to store them. Illinois is experiencing the worst of this issue with lack of storage for about 100 million bushels of crops.
In Chicago, soybean futures have already fallen to a decade low. Some growers have had to sell to local elevators at a large discount to futures.
“The basis is so bad in so many areas of the upper Midwest for soybeans, those farmers will figure out something else to plant,” Brusnahan said.
According to Brock Associates, terminals in Portland aren’t even quoting prices for soybeans because of the lack of demand.
In the Dakotas, producers will have the option to switch to not only corn but winter wheat as well.
Be Prepared, Plan Ahead
Typically, the conversation at harvest revolves around yields. Talk of next year’s planting plans usually begins around the new year. However, this year it is becoming incredibly important to begin this conversation now.
Illinois, Iowa and Minnesota are consistently the top states for planted soybean acres in the U.S. However, the state in fourth may surprise you. North Dakota has held the number four spot for the past five years. This is largely attributed to low wheat prices compared to corn and soybeans.
Soybean acres had their largest increases (2014 and 2017) in years when the soybean/wheat price ratio was nearing 2:1, or soybean prices nearly twice the price of spring wheat. Soybean acres can also decrease in years when the ratio is low.
This past year, the price ratio was less than 1.6:1. Consequently, soybean plantings fell by 500,000 acres. Soybean prices, in flat price terms and relative to wheat, are awful. This could lead to a decrease in soybean acres planted in North Dakota in 2019. Similar changes may be seen in states such as South Dakota and Kansas as well.
When you compare soybean and corn prices, soybean prices are relatively low. As a result, this may lead to more corn acres.
All of this is combined is where planning ahead becomes increasingly important.
Jump ahead 3 months, when harvest is last year’s news and the conversation is focused on 2019 planted acres. The market will be anticipating millions fewer soybean acres, most likely to be replaced by corn and wheat acres. Will the chance to sell Dec’19 corn at $4/bu. and Sep’19 spring wheat at $6.20/bu. still be there?
Read more about the U.S. China trade war from Ag Nook with these related stories.
Additionally, read Ag Nook’s story asking “Will China Back Off on Soybeans?”
Given the conflicts with China, we may see a large shift in what growers plant for 2019. With that said, it is important for producers to plan ahead. In a time when we are typically discussing harvests, growers now need to begin discussing what to plant next.