The substantial run-up in fertilizer prices seems to discourage corn plantings next season.
But don’t look for a big switch to soybeans just yet. The economics of crop production actually favor corn over soybeans across the state, according to University of Illinois ag economists.
“For the last year, (the ratio of soybeans to corn market year price) was clearly signaling a sharp increase in soy plantings,” Scott Irwin, U of I chair of agricultural marketing and farmdoc leader, said during the Illinois Farm Economic Summit. “Then, fertilizer prices increased and we saw new-crop corn futures rally and soybeans fall, which caused a dramatic change in the incentive to plant corn versus beans.”
With a breakeven mark around 2.3, the soy/corn ratio reached 2.5 in late summer, which favored soybeans. But more recently it dipped to 2.22, which makes corn the more attractive option as of the first week of December based on 2022 fall delivery bids.
“The data leads us to look for an increase in corn acres (in 2022), which is different than what the market seems to be expecting,” Irwin said.
Crop projections for 2022
U of I models suggest total U.S. crop acres — about 70% of which are in corn, soybeans and wheat — could increase from 319 million this year to 326.5 million next season.
That includes a projected jump in corn plantings from 93.9 million acres this year to 96 million in 2022, despite the price run-up and supply chain issues of certain inputs. Soybean plantings, on the other hand, could actually slip from 87.6 million acres in 2021 to 85.5 next year, according to the U of I model.
“At least in the Corn Belt, the economic incentive is clearly signaling plant more corn,” Irwin said. “Obviously, it’s early. There’s a lot of uncertainty and plans can change.”
What about the huge spike in fertilizer prices, which pushed anhydrous ammonia costs above $1,200 per ton in the state?
“Fertilizer costs are up about $100 per acre for corn,” Irwin said. “But lost in the discussion, fertilizer costs are up about $50 per acre for beans. So the net increase in fertilizer costs is not as high as it would seem.”
Impact on prices
If an acreage switch to corn is realized, ending corn stocks could jump more than 1 billion bushels to 2.6 billion bushels for 2022/23, with an average price down to $4.25 per bushel.
The U of I model suggests ending stocks of soybeans could decline slightly to 292 million bushels in 2022/23, but the average price could slip from $12.10 per bushel to $11 due to price pressure from other commodities and competition from a potential record Brazilian crop.
Meanwhile, the pace of U.S. export shipments looks to be in line with the U.S. Department of Agriculture’s estimate for soybeans at 2.05 billion bushels. Corn exports could slip from USDA’s estimate of 2.5 billion bushels to 2.475 billion, based on the U of I model.
“In the big picture, soybeans seem to be on track to meet the (USDA) forecast,” Joe Janzen, U of I assistant professor and ag economist, said of export sales. “On the corn side, it’s a little more of a question if we’ll turn sales (on the books) into actual shipments.”
The Illinois Farm Bureau and farmweek.com contributed this article.