2008 Soybean Prices Need To Keep Pace With Corn’s Agronomic Superiority

It is the season.  I’m sure in the next few days or weeks I’ll be getting calls from seed corn sales people.  All of them are my friends.  All of them I enjoy talking with.  However, what to do?  With December 08 corn futures currently at $4.16 and July 09 corn futures at $4.30 it seems our corn future is bright.  Nonetheless there is a lot more to growing corn than growing it and harvesting it and marketing it.  It seems to me when you buy a bag of seed corn these days; you’re buying a bag of science.  Forget about the technology, at the end of the day its all about yield.

Ok, maybe that’s a play on one corporate giant’s marketing propaganda.  However, let me tell you my corn technology story for 2007.  So far I’ve harvested three fields of corn.  The first two fields yielded 170 bushels/acre.  The third field yielded around 100bu/acre and the fourth one I broke open today.  It is the worst of the lot, confirmed after a 10-acre trial run.  I don’t even want to guess.

What happened?  Well, if you read this column over the last year, you’ll know parts of Ontario suffered severe drought and your loyal scribe was right in the middle of it.  My fields that went 170 got a few timely drops of rain.  The other fields didn’t.  At the end of the day even those 170bu/acre yields represents a 25% decrease from last year’s yields.  When I was sucking air at the start of August I wouldn’t have given you a plug nickel for any of those fields.

Clearly though, there was something going on in at least some of those fields to make a difference.  When I say drops of rain, that’s what I mean.  I was in one of the driest areas of southwestern Ontario so what happened that I actually got some decent yields in such a tough dry year?  To me it’s got to be the genetics, its got to be the technology and innovation behind it.  At the end of the day, it’s all about yield and at least in the corn complex some companies are getting that.

It begs the question, are droughts like 1988 and 2001 “events of the past.”  Have corn genetics advanced to a point where producers can look outward into those futures months and aggressively count on 170 bushels/acre come hell or high water?  Has “drought tolerance” become the trait in corn, which resembles more of a “drought buster?”  Or is it everything about “triple stacked” hybrids fighting natural predators to the ground and giving corn a fighting chance for the big yields.  Maybe the answer is all of the above.

However, corn does need some rain, as in my last field.  On that field I got a half-inch of rain from May 14th to August 7th.   It’s pretty obvious, whether its triple stack, quadruple stack, whatever, even the best corn hybrids cannot weather a drought storm like that.  That being said, it’s pretty obvious to me why farmers like to grow corn.  In 2008 the hybrid choices aren’t what they used to be.  Growing corn gives producers a better chance of getting the high yields than present day soybeans could ever hope for.

I offer this opinion very publicly any time I’m near a soybean breeder.  What my favourite soybean breeder tells me is it must be easy to be a corn breeder, they only have to worry about a couple of bugs like European Corn Borer and corn rootworm.  Soybean breeders tell me bugs like soybean cyst nematode, bean leaf beetle, aphids and who knows what else rob soybean yield, effectively limiting the yield frontier.  It was the best explanation I’ve ever received regarding this soybean yield firewall.

Of course I would add the thrust behind new soybean varieties has been nothing about yield and everything about glyphosate tolerance.  Selling more glyphosate had been the flawed goal on the way to 85 bushel/acre soybeans.  It remains so, along with all those new bugs dreaming about munching away on the 2008 soybean crop.

How this will play out for 2008 acreage will be very intriguing for market watchers.  The November 2008 soybean futures month sits at $9.59/bushel.  The May 2008 soybean futures sits at $10.25/bushel.  So there is a reflection in the market that soybeans in the bin now are at a premium to our planting decisions for soybeans presently playing out in our mind.  Something tells me that November 2008 soybean futures will have to rise to stem the real appeal to corn’s agronomic yield superiority.

So is hope on the way for 2008?  I think so, especially for corn grown at 230 bushels/acre.  40-bushel soybeans just won’t cut it anymore.  I haven’t even mentioned wheat or our beloved loonie.  In short wheat in cosmic acreage numbers is planted and pre-sold in Ontario.  The loonie sits at $1.05 plus so high even the Bank of Canada doesn’t have records that show it higher.  Unofficially the Canadian dollar was at $2.78 U.S. in 1864 when the Confederate army was on Washington D.C’s doorstep.  This time, I don’t think we can count on that to help us.

Nonetheless, there are things we can count on.  Corn acreage numbers will be going down in Ontario and down almost everywhere else in 2008.  Soybeans sexiness surely lies in $10 futures and comparatively low input costs.  However, something tells me corn will win out on this one.  The reward will be uncertainty within the grain market on the way to figuring this one out.  The challenge for farmers will be to do there own 2008 calculations.  I’ve already done mine.  In 2008 I simply want some rain.