By TIM THORNBERRY
Kentucky Correspondent

LEXINGTON, Ky. — If the USDA Prospective Plantings report holds true, Kentucky farmers will be producing more corn and soybeans this year and less wheat. In fact, corn and soybeans should each see a 20,000-acre increase over 2008, totaling 1.23 and 1.41 million acres, respectively.

That increase comes off a year that saw significantly higher input and tremendous swings in commodity prices, making it difficult at best by year’s end to get a handle on what to do for the next season. Cory Walters, agricultural economist in the University of Kentucky (UK) College of Agriculture, said the increases may be a result of an economic shift that has taken place in the grain markets since last summer.

“Fertilizer and commodity prices have dropped significantly from what they were last summer, but recently commodity prices have risen, so producers are seeing profitability in growing corn and soybeans,” he said.

It will be the state wheat crop that takes a backseat production-wise this year with 50,000 fewer acres planted than in 2008. Walters said the decrease likely was caused by the high price of inputs compared to lower wheat prices at planting time last fall. But that doesn’t mean a decline in wheat production here will become the norm.

“As for becoming a trend, I think producers will reevaluate whether or not to plant a wheat crop each year based upon the cost of inputs during planting time and wheat price at harvest,” he said.
Soybeans, on the other hand, are seeing the best market prices thus far this year. Walters said the most recent USDA supply-demand report has likely helped with that increase.

“The report reduced the previous soybean carryover forecast by 20 million bushels to 165 million bushels – a five-year low – which has helped fuel the current soybean price rally,” he said.

Walters also said soybean planting intentions for the coming season would indicate a record year while the export market is strong. “As for new crop, the USDA planting intentions report indicated record soybean plantings this year at 76 million acres, a value perceived to be below traders’ expectations. This news has helped push November 09 futures price to almost $9.50, a value not seen since the beginning of February,” he said.

“Remember, according to the USDA planting intentions report, about 7.8 million acres were missing this year from last year, and coupled with the current soybean price rally, some of these acres may be planted to soybeans. On the consumption side, soybean exports have been excellent and may continue this way due to reduced export competition from South America.”

While planting intentions for corn look to increase in the state, the upswing doesn’t follow the national trend. Walters referred to the USDA planting intentions, saying, “Corn-planted acreage will be down 1 percent to 85 million acres, a value higher than traders expected.

“Now with uncertainty about when the crop will get planted, short-term corn prices may face upward pressure, unless the weather is already factored into the current price. The final number of planted corn acres will also be influenced by the 7.8 million ‘missing’ acres.”
Walters believes commodity price swings will continue this year and it will be important to make decisions such as: developing one’s own price outlook while being realistic with price expectations; selling in small percentages; protecting prices (i.e., using options) when they are above breakeven costs; and not waiting to make any sales until forced to do so.

With the current price volatility agriculture is experiencing, he added making all the right decisions is impossible, even though farmers have strived to make more right decisions than bad decisions. While the recent report is a good indicator of what is to come in the young growing season, it is just a first look and things are likely to change as we progress into the year.

“This is just the first estimate of what may happen this season. It’s still early here,” said Walters. “The report is a more accurate depiction of places like Texas, that already have their corn planted by the time the report was compiled.”