Crop Acre Shift May Slow

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Will Connell’s clients’ soybean acres are up, and cotton is down. Although corn has not made inroads to his part of North Carolina, grain sorghum has. A decision by Murphy Farms to use lower cost sorghum instead of corn in hog rations has raised the price enough to make this “new” crop attractive to Connell’s clients.

“Farmers with sandy soils are more likely to switch to grain sorghum than corn,” noted Connell, Ag Consultant, Inc. “The increase in corn prices has raised the price and interest in grain sorghum.”

Jack Royal, Royal’s Agricultural Consulting, Co., is starting his 36th year as a crop consultant and has seen his share of change in cropping patterns. He sees similar shifts to Connell in his area of west Georgia, with increased corn acres and some increase in grain sorghum. The strength of peanuts in his area makes crop rotations, whether with cotton or corn, vital. It also adds strength to the case for wheat. The recently improved corn price and increased cost of weed control in cotton is enhancing interest in corn and less water-dependent grain sorghum crops.

“You don’t want to mess up a rotation by following peanuts with soybeans or vice versa,” said Royal. “The main thing we try to do is keep a good rotation with peanuts, corn and cotton. Our biggest acreage jump was in corn, but it has to be irrigated. Corn acres had been down in recent years until the price went up. We can plant grain sorghum on dry land. It can take a lot of stress, and we can make a little money on it.”

LOOKING AT MORE OPTIONS

Although grain sorghum doesn’t represent a lot of acres for Royal, it is one more option, and that’s important when peanut acres can fluctuate by 50 percent from one year to the next. Drought in 2011 reduced carryover and enhanced contracts for peanuts in 2012. This pushed peanut acres in Georgia from 450,000 acres in 2011 to 725,000 acres. This year the opposite happened, and acres are expected to be down at least 40 percent. Stronger wheat prices increased acres of winter wheat.

Price is what matters to Connell’s growers as well. He recalled his clients’ acres shifting to cotton from soybeans, thanks in part to the government program incentive to build base and to lower soybean prices and increase cotton prices. With the government program no longer rewarding base acres, commodity prices are again king makers. On the local level, that can create some unlikely contenders. Connell reported expanding acres in clary sage, a crop in demand by the perfume and scent industry for use in laundry detergents and other consumer products. Cropping shifts big and little require change and learning new things.

“Many of our clients were new to cotton when it expanded 35 years ago,” said Connell. “They learned new tactics for the crop. They are doing it again with sorghum. Some of them remember their dads having some, but they don’t know the old ways. It has been so long since it’s been grown here.”

The  experiences of Connell and Royal are a reflection of recent shifts in cropping acres throughout the country. Over the past 10 to 12 years, large acreages in the South moved from cotton and rice to corn and soybeans. In the Plains states, wheat dropped significantly as corn and soybeans rose. Hay in the West is down some, though not as much as the rest of the country.

MARKET TRENDS DRIVING SHIFTS

While the delayed 2013 spring created some turmoil, USDA Economic Research Service projected total crop acres for corn, soybeans and wheat slightly higher than in 2012. Total crop acres for the eight largest crops (corn, soybeans, wheat, sorghum, barley, rice, oats and cotton) were expected to match 2012. However, continued crop acre shifts were also projected year to year within the group. These included an 18.6 percent decrease in cotton acres, a 22 percent increase in sorghum acres and a 3 percent decline in rice.

Mark Jekanowski, economist, USDA, ERS, follows crop acres closely. Along with colleague Gary Vocke, he recently reported on the impact of prices on market trends in Amber Waves, a USDA ERS online publication. He said crop acre fluctuations are simply U.S. farmers doing what they do best, responding to market signals.

“There are always costs or constraints to shifts among crops,” said Jekanowski. “While it is relatively easy to shift between corn and soybeans, the investment needed for cotton might keep some farmers in it and others out. That said, farmers in the U.S. and elsewhere do respond relatively quickly to changing price conditions and show a willingness to expand into crops not traditionally grown on their farms.”

For much of the change in crop acres over the past decade, Jekanowski gave credit to the government policies and support for biofuels, as well as international demand for food and feed grains. The former supported the tremendous expansion of corn. Export demand helped soybeans maintain and expand their acres.

“You can’t just substitute corn for soybeans in the world market,” said Jekanowski. “You have to maintain roughly the same production of soybeans.”

At the same time, the domestic milling industry essentially went away, reducing local demand for cotton. Cotton acres in other areas expanded, out competing U.S. farmers. This put cotton acres in the U.S. up for grabs. Expansion of wheat production in the former Soviet Union, especially the Black Sea region, is eating into U.S. market share for that commodity as well, opening up wheat acres for corn and soybeans.

Jekanowski reported that the situation with rice is different, though the results are similar. “Rice prices have advanced nicely over the past decade and seem to have leveled off,” he explained. “The shift here is more a cost story. Of all the basic commodities, it remains the most costly to produce. Rather than put so much investment at risk, a lot of rice farmers have decided they can make the same return, or close to it, raising the easier to grow corn or soybeans.”

GROWERS ADAPT TO MARKET DEMANDS

If world demand and biofuel policies have caused the recent shift in acres, shifting demand and policies could send them back or in a new direction. Jekanowski doesn’t see that as imminent, nor does he expect the trend to continue at the rate of the past 10 years. Although he admitted it is always difficult to speculate, he feels the shift trendline has plateaued or at least slowed down, with some variation with weather events as seen this spring with delayed planting. 

“We can expect a continued growth in the U.S. market for soybeans and feed grains, and there doesn’t appear to be any reason to expect a reduction in China’s commitment to feed their population or a change in U.S. biofuels policies,” said Jekanowski. “The market appears to be where it needs to be, with production supplying the demands that are out there.”

Regardless of how or where the market moves, Royal is sure his growers will adapt. “I feel like I work with the cream of the crop of growers,” he said. “They are always receptive to new ideas.”




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