Rates can crown the king of corn again
Rates can crown the king of corn again
American farmers hit by the commercial battle between the US and China They are preparing to remodel the US Farm Belt. UU planting more corn and less soy next year in a land mass potentially equal to the size of Connecticut.
For decades, corn was the crop chosen by farmers in the United States, its tall stems covering the landscape of the Midwest. Soybeans, shorter and busier, began decades ago as a niche crop in less cultivated area, but came to rival corn in recent years due to the growing demand from China.
US farmers in 2018 planted more soybeans than corn for the first time in more than three decades, betting on that demand. But Chinese tariffs on US soy have hurt that bet: US exporters have sold less soy to China, usually The largest foreign buyer of the harvest., in the last seven weeks than in a single week last fall. Soybean inspected for export from ports in the Pacific Northwest, one of the main originators of soybeans in the United States to China, was recently 82% below its level of the previous year. The prices of oilseeds have dropped by 11% this year.
"Prices will tell you that you will see a significant shift from soybeans to corn in the US," said Soren Schroder, executive director of the grain trading giant.
Bunge
Limited.
, speaking at a Wall Street Journal conference in September. Some analysts say that farmers could convert up to four million acres of soybeans to corn next spring.
Many farmers and agricultural officials said that the final choice of crops may not be made until weeks or days before planting begins, in part due to uncertainty about tariffs. President Trump and his Chinese counterpart, Xi Jinping, are scheduled to meet at the Group of 20 summit leaders. In Buenos Aires next month.
However, the outlook for soybeans is worrisome. "It's not going to increase the crop in which you lose $ 2 per bushel each year," said Joel Schreurs, a Minnesota farmer who is considering changing 30% of his soybean acres to corn next year if Chinese taxes are still in effect. Federal assistance dries up.
If enough American farmers follow their example, while Brazil, Soy giant of South America, makes improvements to its export infrastructure, the United States could give up the advantage in soy production, he said.
The situation could pose challenges for agricultural retailers and grain merchants in charge of transporting crop supplies and handling a new grain flood. However, analysts said moving more fields to corn could boost seed crop vendors and fertilizer suppliers.
Corn has tended to be a more profitable product for seed companies like
Bayer
AG
,
DowDuPont
Inc.
and Syngenta AG and would give them a boost, at least in the short term. With its longer growing season, corn is more susceptible to weeds and destructive insects, which means that farmers often look for expensive seeds with genes inserted to repel pests. Because corn produces more grain per acre than other crops, seed companies can also charge more for a bag.
At a seed conditioning plant in Waterloo, Nebraska, farmers' initial preference for corn means that Syngenta employees are working to clean, scan and pack more corn seeds than usual for this time of year to prepare them for the sale next spring. If farmers' renewed demand for corn is maintained, Syngenta can immerse themselves in their corn seed "security reserve" to fulfill orders, said David Hollinrake, who runs the company's seed business in North America. .
Commercial pressure on farmers has helped fuel the latest talks between the United States and China with the goal of raising tariffs on soybeans, pigs and more. Here, an American farmer and a steel worker explain how rates are affecting their livelihoods.
Kevin Cavanaugh, research director at Beck's Hybrids, one of the largest private seed producers in the US UU., He said that the company's corn seed sales are 15% higher than those of soybeans. While there is plenty of time for farmers to change their minds before spring planting, he said that "things are really aligning to produce more corn."
That would be a blessing for fertilizer companies, particularly for nitrogen suppliers like
Y
Nutrien
Limited.
Corn plants can not produce their own nitrogen like soybeans do, forcing farmers to apply it to their fields in the fall and spring to increase yields.
Researchers at the University of Illinois estimate that a farmer who grows crops on leased land in northern Illinois will lose $ 64 per acre of corn next year, compared to $ 95 per acre of soy. According to the researchers, it is the first time since 2013 that corn is projected to be a better economic proposal than soybeans.
However, corn may not be a panacea, especially for farmers who have accumulated debt, according to Matt Schreurs, vice president of loans at First Security Bank in Lake Benton, Minnesota. "We are running out of cord for many operations," said Mr. Schreurs, who is Joel Schreurs' cousin. Some farmers anticipate that bankers will be more involved in planting decisions this year, when analyzing the finances of a farm before offering loans.
Farmers and grain elevators, particularly in the Midwest, are now struggling to find alternative markets for soybeans, as well as a space to store this year's crop, which US Department of Agriculture projects will set a record . Many elevators are preparing to throw three heaps of grains high on the ground to make room for the soy beans. Soybeans can rot if not properly dried, a growing fear in North Dakota, where a recent snow covered the crops and delayed the fall harvest.
Soy has boomed in North Dakota, with the area planted more than quadrupling in the last two decades, as grain companies and railroads helped build a corridor to the Pacific Northwest to bring the harvest to the stables in China.
Finding a home for the increase in corn supplies poses its own challenge. While US pig and chicken breeders are expanding to supply new processing plants, it is likely that the added animals will not be enough to absorb all the bushels that hit the market, said Ankush Bhandari, head of economic research at Gavilon. , a United States grain merchant.
"A lot of that [corn] It would have to find its way into the export market, "he said.
Write to Jesse Newman in jesse.newman@wsj.com and Jacob Bunge in jacob.bunge@wsj.com
.
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