With harvest complete, farmers will be spending some time deciding what crops to plant in 2013. Big shifts in acreage aren’t expected but on the margin relative net returns can cause some acreage to shift.
This week we extend the Cost-of-Production budgets through 2013 to get a sense of how the various crop options stack up. For the exercise, we use the new crop futures prices (Dec. 2013 for corn, Nov. 2013 for soybeans, Sept. 2013 for wheat, and Dec. 2013 for cotton). Weather and other factors can cause further shifts in acreage in the spring, but this analysis provides some insights into the net returns over operating costs that farmers are looking at this fall.
The net returns for corn are significantly higher than those for soybeans in most regions of the country. The national budget for corn (adjusted to a corn-following corn basis) shows net returns over operating costs of $577 per acre, compared to net returns for soybeans of $445 per acre.
This is an even bigger advantage for corn than was the case last winter when corn net returns came in at $454 per acre compared to $369 per acre for soybeans. According to last spring’s Prospective Plantings report, farmers planned to plant 95.9 million acres to corn in 2012 up from 91.1 million planted in 2011. Soybean acres were set to decline by a little more than 1 million acres according to the March planting intentions. In the end, farmers planted both more corn and more soybeans for 2012.
A similar outcome seems likely for 2013. There is little economic incentive for farmers to plant less corn, especially in the heart of the Corn Belt. Based on the budgets net returns for corn are higher than those for soybeans in almost every region. Admittedly, a few farmers may face cash flow shortfalls because of the 2012 drought and that could encourage them to plant less costly soybeans. In addition, the high prices for wheat combined with the high price for soybeans will probably boost double-cropping in areas where that is an option. This is expected to result in an increase in soybean acreage for 2013 even with the net returns advantage that corn currently holds.
Cotton acreage is expected to decline in 2013. Cotton prices are low and net returns for soybeans and for corn are higher than those for cotton in key growing areas. The net returns over operating costs for cotton in the Southern Seaboard region (most of the Southeastern U.S.) calculate to $225 per acre, compared to $332 for soybeans and $411 for corn. The big question is not whether cotton acreage will decline, but how much will it decline.
Wheat and soybean acreage may also increase in the Northern Plains states and in the Prairie Gateway region. Contracts covering land in the CRP in these regions expired in September, adding to the pool of land available for crops next year. Net returns over operating costs for soybeans are a little higher than net returns for spring wheat, but the difference is pretty small.
Acreage of both crops will probably increase in 2013.
A lot can happen between now and next summer, but the budgets provide some insight into potential acreage shifts for next year. The following table shows our current acreage forecasts for the major crops for 2013.