High fertilizer prices appear to be biting more than investors had thought.

The US has, in one of its highest-profile reports of the year, revealed that US farmers will plant many more acres with soybeans than been expected, and far less corn.

With cheap-to-grow alternatives, such as barley, also being favoured in spring sowings programmes, it looks very much like farmers are looking to scrimp on inputs when it comes to choosing what crops to plant.

Costs gap

That is not such a surprise, given the extent to which the fertilizer price boom has swollen production costs.

Variable costs of growing nutrient-hungry corn this year are up more than 55% from 2021, according to Purdue University, using a benchmark of average land in Indiana, one of the three key Corn Belt “I states”.

For wheat, which requires nitrogen dressings to make its protein specs, the rate of cost inflation is not far behind.

However, for soybeans, which fix nitrogen from the atmosphere, the increase is a more modest 35%.

Winner and losers

What did prove unexpected was the extent to which such calculations have influenced growers.

The 89.5m acres of corn that the official report showed US farmers intending to grow stood 3.9m acres below last year’s figure – a drop 2.5m acres above the level investors had expected.

For (non-durum) spring wheat, sowings will show a surprise decline, of 220,000 acres.

However, for soybeans, the 91.0m acres that growers have pencilled in – up 3.8m acres year on year to a record high – was 2.2m acres above the level that the market had forecast.

Harvest impact

That matters, when markets are trying to correct weather-, and war-, depressed ag supplies.

Sure, for soybeans, the extra plantings imply more crop than had been expected, to the tune of some 110m bushels, factoring in three-year average US abandonment and yield numbers.

But for spring wheat, the data imply some 24m fewer bushels from this year’s harvest than investors had expected – curtailing hopes for a rebuild of US stocks expected to end this season, for hard red spring wheat, at a 14-year low of 124m bushels.

For corn, the sowings figure implies nearly 400m bushels fewer than the market has pencilled in – a shortfall with the potential to more-than-reverse the modest rebuild in US inventories expected for 2021-22.

Price implications

Such sums explain why new crop December corn futures so significantly outperformed their, November, soybean peers after the data.

Markets are attempting through crop values to boost the compensation to farmers for extra input costs.

Still, it is spring wheat which may require more in the way of correction than corn on this scope from here.

Thursday’s price moves cut significantly the relative appeal of soybeans compared with corn. The new crop soybean-to-corn price ratio, which stood at some 2.5 times earlier this year, tumbled below 2.1 for the first time this season.

However, for spring wheat, the November soybean-to-Minneapolis December futures price ratio of 1.36 was, while below early-2022 highs of 1.5, less extreme, being above levels seen late in 2021.

A further fall in that ratio may be warranted to reinforce prospects for a US inventory rebuild.