April 8, 2008

USDA's corn and soy forecast could prompt farmers to do the opposite

USDA's forecast that American farmers would be cutting back on corn this year in favor of soy could prompt farmers to do just the opposite.

Even days before the report was released, soy prices begun a sharp decline on similar expectations.

Soy futures prices have fallen more than 20 percent since early March, to just over US$12 a bushel from almost US$16 a bushel, while corn prices have held relatively steady, near US$6 a bushel.

American farmers planted 93.6 million acres of corn last year, more than any year since 1944, because of high prices. Corn has been in heavy demand in the US due to the ethanol industry, while booming economies in the developing world are buying more of the crop for animal feed and other uses.

Farmers planted soy, meanwhile, on 63.6 million acres, the smallest figure in 12 years.

Using surveys of farmers conducted in early March, the USDA said farmers would shift back toward soy this year.

Across the country, the USDA projects farmers will plant 86 million acres of corn, 8 percent less than last year while the soy crop would grow 18 percent.

The projections, combined with the soy price drop, could push more farmers to reconsider.