Soybeans Stage Land Grab as U.S. Farmers Chase Profits -- Update
February 23 2017 - 06:01PM
Dow Jones News
By Jesse Newman and Jacob Bunge
ARLINGTON, Va. -- U.S. farmers this year are gearing up to sow
more soybeans than ever before, betting on the oilseeds to keep
them afloat as farm incomes drop for a fourth consecutive year,
according to a new U.S. Department of Agriculture projection.
Farmers likely will expand soybean planting in 2017 by 5.5% to a
record 88 million acres, USDA Chief Economist Robert Johansson said
Thursday. Soybeans' land grab across the U.S. Farm Belt would come
at the expense of corn and wheat acres, which are expected to
decline from last year's totals.
Robust buying by China, the world's largest purchaser of
soybeans, and steady demand from domestic processing plants are
supporting soybean prices, making them more attractive to farmers
this year.
"For the first time since 1983, there's a fair chance we'll
plant more soybeans than corn," said Kurt Koester, president of
Iowa-based brokerage AgriSource Inc. That year, farmers were paid
to idle millions of corn acres to secure government subsidies
designed to combat low crop prices.
The cream-colored legumes have grown from a niche crop raised on
about 1.5 million acres in 1924 to nearly equal corn as the most
widely grown agricultural commodity in the U.S. according to the
USDA forecast. While corn prices gathered momentum after the U.S.
established an ethanol mandate in 2005, soybean prices have proven
more resilient after four straight years of grain and oilseed
bumper crops filled farmers' bins and depressed prices
globally.
Soybeans are widely fed to livestock and processed into
everything from oil for deep-fat fryers to coolant for high-voltage
transformers. Futures prices for soybeans traded on the Chicago
Board of Trade rose 14% last year, while corn prices declined 2%
and wheat slid 13%.
Better economic conditions around the world are expected to lead
to increased overseas demand for U.S. agricultural commodities in
general this year, according to Mr. Johansson, who spoke at an
annual USDA conference in Arlington, Va.
But with their incomes expected to slide 9% this year, marking a
fourth year of declines, farmers are searching for ways to boost
profits and cut costs.
"With farmers' profit margins the tightest they've been in
years, soybeans appear to be a small bright spot," said Mark
Jensen, chief risk officer at Omaha, Neb.-based Farm Credit
Services of America.
Concerns are also lingering that trade relations with key buyers
of soybeans and other U.S. farm goods could sour under President
Donald Trump. Mr. Trump, who on the campaign trail delivered
blistering critiques of U.S. trade agreements, has bowed out of the
Trans-Pacific Partnership and vowed to follow through on plans to
renegotiate the North American Free Trade Agreement, which
agricultural groups say has been key to boosting U.S. agricultural
exports to Mexico and Canada.
"The U.S. has the most to lose of any sector when it comes to
trade," said Luke Chandler, deputy chief economist for Deere &
Co., at the USDA conference.
Soybean producers are among those in the farm sector who have
pleaded with Mr. Trump to tread lightly on trade deals, for fear of
disrupting the flow of U.S. supplies at a time when domestic
stockpiles of the crop are expected to swell to the highest in a
decade.
"I'm optimistic that new trade deals will focus on market access
that will especially help rural America," said Iowa Gov. Terry
Branstad, whom Mr. Trump has tapped to be the next U.S. ambassador
to China.
Mr. Brandstad said he was confident the Trump administration
would pursue export growth and work to eliminate barriers that
countries like China have imposed against U.S. agricultural
products.
In particular, Mr. Branstad said he hoped to see the removal of
Chinese restrictions on U.S. beef as well as tariffs on imports of
U.S. dried distillers' grains, an ethanol co-product used in animal
feed. Earlier this month, an ethanol industry group said U.S.
exports of the feed ingredient fell 10% last year amid a sharp
drop-off in purchases by China.
Meanwhile, farmers are eschewing corn as they chase profits.
The USDA predicts growers will sow 90 million acres of corn this
year, down from 94 million in 2016. The average price for a bushel
of corn is forecast to rise to $3.50 a bushel, up 3% from the
2016-2017 season, the USDA said, though that is half of 2012's
record levels.
Soybean futures prices fell after the USDA released its higher
acreage projection, with March contracts settling 1.1% lower at
$10.11 1/2 a bushel. Prices have declined about 4% over the past
month but remain nearly 17% higher than a year ago, boosted by
export prospects.
Write to Jesse Newman at jesse.newman@wsj.com and Jacob Bunge at
jacob.bunge@wsj.com
(END) Dow Jones Newswires
February 23, 2017 17:46 ET (22:46 GMT)
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