Farmers intend to plant less corn, more soybeans
By Meatingplace.com/United States Department of Agriculture
Word from several US sources indicates farmers south of the border are likely to plant less corn and more soyeans than expected, with expectations that such a move might hurt meat and poultry sectors.
March 31, 2008
U.S. farmers responding to a survey in the first two weeks of March indicated they plan to plant about 86 million acres of corn, down eight percent from last year and 74.8 million acres of soybeans, up 18 percent, according to USDA's Prospective Plantings report.
Analysts were expecting the report to show planting intentions of about 87.4 million acres of corn and 71.5 million acres of soybeans.
USDA said wheat farmers expect to plant about 63.8 million acres, up six percent and in line with analysts' expectations of about 63.6 million. Existing wheat stocks are at historic lows, which have contributed to skyrocketing food prices.
The reduced corn acreage was seen as negative for poultry producers in particular, due to the high percentage of corn in feed rations. Analysts had mixed views for meat producers, citing the upside of more soybeans translating into cheaper soybean meal, and the downside of more expensive corn as a feed component.
BB&T Capital Markets analyst Heather Jones in a note to investors called the corn forecast "a distinct negative" for integrated processors like Smithfield Foods. JP Morgan analyst Pablo Zuanic saw it as worse news for the likes of Tyson Foods, Pilgrim's Pride and Sanderson Farms, noting a $1 change in the price of corn per bushel equals a four cent change in the cost per pound of ready to cook chicken. He saw the corn acreage as relatively less of a negative for Smithfield.
In a note to investors Zuanic also reaffirmed his view that farmers will reconsider these planting intentions because corn continues to be more profitable than soybeans. Actual plantings often vary from intentions. In 2007, the Prospective Plantings report forecasted corn acreage at 90.5 million acres, but actual planted acres turned out to be 93.6 million.
Jones, however, predicted corn demand would have to be "rationed dramatically as we arrive at 2008-2009," unless other global producers increase their corn production. She also predicted the reduced corn supply could put some smaller ethanol producers out of business.
USDA attributed the lower corn plantings forecast to favorable prices for other crops, high input costs for corn and crop rotation considerations as farmers who planted near record corn acres last year switch back to soybeans. Some analysts have also noted the cool, wet spring in the Midwest could push acres to soybeans as corn is traditionally planted earlier than soybeans.