November 21, 2005

 

More US farmers may switch from planting corn to wheat

 

 

While oil prices and natural gas are down from their recent highs, they remain high enough that US farmers may plant less corn next year than they did in 2005, sources said.

 

Since many farmers prepare their corn fields in the fall before the ground freezes by injecting the soil with anhydrous ammonia-which has risen in price along with natural gas-many of them have already decided to save money on inputs and plant less corn next year.

 

"I think there was a fear it could be around 3 to 5 percent (diverting acres from corn). But, I think what we're seeing now is more like a 2-percent switch out of corn acres (nationally) into something else," said Don Roose, president of US Commodities in West Des Moines, Iowa.

 

Diesel fuel is the biggest expense for producers, although natural gas is important as it is the primary component of ammonia nitrogen fertiliser.

 

Natural gas futures in October shot to a record high US$14.75 for each million British thermal units because of supply interruptions from hurricanes Katrina and Rita. While nearby futures prices have backed off some, they are now trading at US$11.414, compared with about US$9.20 in November 2004.

 

While some farmers apply anhydrous ammonia in the spring, many large-scale producers do it in the fall to save time in the spring.

 

"What you'll see is the big producer making the decision now. Producers are still leaving themselves flexibility for the spring on upwards of 5 to 10 percent of his ground," Roose said.

 

If farmers planted 2 percent less corn next year, it would take planted acres to about 80 million, from 81.6 million acres in 2005.

 

Bill Nelson, associate vice president at A.G. Edwards in St. Louis, said he has heard much more talk this year from farmers switching out of corn and into wheat or soybeans.

 

"These are farmers who haven't grown wheat in several years. I had calls from the main wheat belt, but what was most striking was calls from central Illinois, where there's hardly any wheat. It was unlike any other year," Nelson said.

 

In addition to high input costs, drought and low corn prices also have affected farmers' planting decisions.

 

With January soybean futures closing at US$5.69 3/4 a bushel Friday on the CBOT and recently hitting the US$6 mark, the commodity may look more attractive to producers than corn may. Also, many farmers pulled "spectacular" yields from their soybean fields this fall, Nelson explained.

 

However, some farmers are taking a "wait-and-see" approach and will evaluate what energy and input costs do in the upcoming months, according to Marv Wilson, marketing director at Pioneer Hi-Bred International Inc, a subsidiary of DuPont, in Des Moines.

 

"We've seen such a shift from a month or two ago to today (energy prices coming off their highs) that, for the most part, customers are going ahead and putting together a normal 2006 crop plan together," Wilson said, adding that he does not expect big shifts from one crop to another.