Soybean planting area hits record high, corn loses its appeal

This spring US farmers cut back on corn acreage and pushed soybean plantings to a record high, with overseas demand currently strong, and planting is expected to be dominated by soybeans in the coming years.

This marks a reversal in US planting trends. Over the past 10 years, because corn prices soared, US farmers expanded corn acreage as much as possible. “The planting focus has clearly shifted to soybeans,” said Sal

Gilbertie, president of Teucrium Trading. The company manages single-commodity exchange-traded funds (ETFs) that invest in grains and oilseeds. “Farmers naturally respond to very basic questions like which crop is most profitable.”

In recent years, corn prices rose strongly, with Chicago Board of Trade (CBOT) corn prices hitting a high of $8.43-1/4 per bushel in August 2012. Farmers were also willing to take on some risk and increase acreage so that they would not be hit too hard if yields came in below expectations, so corn acreage rose sharply in marginal areas of the Corn Belt such as North Dakota.

But corn prices have now fallen 40% from their 2012 high, and maximizing yields has become key to securing returns. In 2014, US soybean acreage increased by 8.31 million acres, the fourth-largest annual increase in history.

The US Department of Agriculture (USDA) said soybean conditions this year are excellent and autumn soybean production is expected to reach a record high, even though a slightly late start to planting had raised concerns that overly high soil moisture could affect yields. The USDA's latest crop condition report shows the soybean good-to-excellent rating at 70%, the highest for late August in 22 years.

Soybean production is expected to reach a record high, and a large portion of it will be absorbed by surging overseas demand. The USDA forecasts soybean exports of 1.675 billion bushels in 2014/15, with top buyer China expected to purchase most of the US export soybeans.