US farmers will lift corn sowings to a 10-year high in 2023, provided fertilizer markets comply, with wheat plantings to rise too, as growers attempt to cash in on elevated grain prices.
US corn sowings next spring will reach 94.28m acres – up by 4.46m acres year on year, and the largest area since 2013, a grower survey by Farm Futures showed.
Wheat area will also expand, by 2.95m acres year on year to 46.992m acres, as recovery in winter crop sowings to a seven-year top of 36.55m acres more than offsets a decline in spring wheat seedings.
However, the increase in corn area will come in part at the expense of soybeans, seedings of which will slip by 694,000 acres in 2023 to 87.33m acres, according to the survey of nearly 700 farmers.
Futures market signal
The preference of growers for corn aligns with signals from the Chicago futures market, where the November 2023 soybean contract was on Wednesday worth 2.19 times as much as December 2023 corn futures.
That is an unusually low ratio, GrainPriceNews records show, with the ratio as of this day last year at 2.49.
While investors differ in their interpretation of this ratio, a level of 2.40 is often taken as a neutral number, with figures above that encouraging farmers to plant soybeans, and below that incentivising corn seedings.
Wednesday’s ratio is also below the 2.33 it stood at a month ago, while the survey was being taken, signalling potential for growers’ appetite for corn to increase further.
However, the survey was also taken during a period of declining fertilizer prices – a move which threatens to reverse thanks to the jump in gas prices in the US, as well as in Europe.
Gas is particularly important for Western manufacturers of nitrogen fertilizer, requiring high temperatures and pressures to fix the gas from the atmosphere, and typically accounts for some 60-80% of production costs.
“Ongoing energy crises have slowed nitrogen fertilizer production in the European Union and China, which is likely to raise input costs and influence farmers’ planting decisions in the months to come,” Farm Futures said.
A series of European nitrogen makers have unveiled capacity reductions, most recently Norway-based Yara International, with CF Industries also last week announcing cutbacks at its UK Billington plant.
In China, a key urea exporter, Sinofert Holdings too last week announced some nitrogen and phosphate capacity losses to power rationing in the south of the country.
The Farm Futures survey shows farmers lifting total plantings with the top three crops by 5.6m acres year on year, to 230.5m acres.
That would also be the largest combined acreage for the three crops since the 230.7m acres recorded for 2014.
While the survey did not expand to other crops, it did flag the potential for soybeans also to lose ground to cotton.
The survey “forecasts lower soybean acreages in the Mississippi River Delta, which suggests that this year’s cotton production shortfalls could steal away acreage from soybeans next spring”, the publication said.
However, the ratio of December 2023 cotton futures to November 2023 soybeans, converted to a per-tonne basis, of 3.85 on Wednesday is a little below the 3.93 seen a year ago.