2011 Plantings: Soybean Yield Lag Boosts Corn’s Chances

Soybean Yield LagThis past week I traveled to Uxbridge and Watford Ontario to speak on behalf of Reesor Grain and Seed Ltd and Wanstead Co-op.  It is always an enjoyable time when I get to meet DTN subscribers.  As we look into 2011 there are certainly many production and marketing challenges in front of us.  Both of these meetings were packed with enthusiasm for the coming production year.  I had one DTN subscriber tell me, “Phil, we need a couple more years like last year with these prices!”   I laughed and responded by telling him maybe we were getting a little bit greedy.

Of course it is a heady time to be a grain producer.  Corn prices are within striking distance of breaking the all-time highs.  Soybean prices are still quite far away from that, and in fact, have lost ground over the last few weeks.   The USDA says they expect 9.8 million more planted acres in 2011.  I find that hard to believe.

Of course there are many fireworks to come.  As always this time of year the focus changes a bit as we look toward the “mother of all USDA reports”, the March 31st prospective plantings report.  Yes, the hype will build, as we get closer to that report.  If it does not say enough acres for either corn or soybeans, you will surely expect some price fireworks.

This is where I think it gets interesting.  You can make all kinds of arguments regarding the future acreage mix in 2011.  However, when I am asked to these speaking engagements I am often privileged with listening to production experts explain the nuances of fertilizer use for corn and soybeans.  Earlier today I heard one such expert, Dale Cowan of Wanstead Coop in Watford Ontario.  He cited a study that said corn yields were jumping at about 2.2 bushels per year and soybean yields were jumping about .4 bushels per year.  Tracey Baute, a renowned Ontario entomology expert who described a host of soybean pests, which are hard to control, followed him.  Listening to those two speakers, I kept thinking with all of these soybeans problems maybe it just screams “plant corn”.

I say that because soybeans are not keeping pace with corn on the yield front.  That’s bad enough, but when you add the soybean cyst nematode with sudden death syndrome and soybean aphids, planting corn seems so much easier and profitable.  So as I look into 2011 I think there will be a natural bias for corn in the US Corn Belt as well as Ontario, Quebec and Manitoba.

So at least in Ontario, we’d like a rerun of last year where we had a record provincial average yield in corn and generally good weather.  Needless to say, be careful what you wish for.  The point being it is highly unlikely that we will see the same type of benign weather conditions in 2011, which brought us bountiful crops in 2010.  I am hopeful but the law of averages tells me it is much more likely for us to have a normal year. Still, as pointed out to me last week in Uxbridge Ontario by central Ontario producers, they’d much rather grow corn versus soybeans.  Corn gives them the consistency and yield while soybeans are always a crapshoot.

Some of you may think that I’m just being whiny because I’m 100 bushels per acre behind the champion soybean yield winner in Missouri who gets over 150 bushels per acre soybeans.  No, I’m not whining, but sadly that is the reality.  However, because soybean yields are so difficult for many of us, I think that the November soybean futures contract has a little bit of work to do to get those 2011 soybean acres planted.

John Sanow in his latest DTN piece writes eloquently about soybean demand.  In that piece he writes since 2006 2007 marketing year Chinese demand has increased year over year by an average of 7 MMT.  That’s extremely significant keeping demand buoyant.  Yes, Brazil may produce this year 72 MMT of soybeans but with Chinese demand so insatiable, there’s not a lot of room for error in 2011 soybean country.

While in Uxbridge Ontario, one farmer came up to me and said when he graduated from agricultural college in the 1960s, the world was at a stage where it needed all the production it could get.  He said in 2011, it looks to be the first time we have the same conditions since then.  We’ll see what happens.

So as we move toward planting time markets will surely grow more skittish.  Of course I do not know what will happen, but something tells me November soybeans won’t get it right.  That proverbial soybean yield lag is too much to leap over.   I can believe a lot more corn, not so much for soybeans.  Getting it right this year has never been so tight.