Air Freight News

Virus anxiety makes corn the safer bet for America’s farmers

After dealing with the trade war, extreme weather and depressed prices, U.S. farmers are ready for a safe bet. In America’s heartland, that means planting corn—and lots of it.

The No. 1 U.S. crop keeps growers more isolated from the whims of Chinese demand, now in peril thanks to the deadly coronavirus epidemic. Corn prices have held up better than rival soybeans over the last few years. And even with the Beijing-Washington trade deal in hand, it’s unclear how much soy buying will recover as the Asian health crisis threatens food demand.

“Corn acres are more apt to get planted” this year, North Dakota farmer Monte Peterson said, adding that he will prioritize the grain on his 3,000 acres.

U.S. corn plantings will likely climb to 94 million acres, the highest in four years, the U.S. Department of Agriculture said Thursday. While soybean acres should also rise, they are projected to stay below pre-trade war levels.

Farmers are looking for some solace after a tough few years.

On top of the trade war, wild weather sparked record planting disruptions last spring which then got compounded by harvest delays in the fall. Amid the woes, farmers’ best source of income in 2019 turned out to be government bailout payments. The aid kept them afloat, but for most, it was an unsavory measure of last resort.

But corn has been a little bit of a bright spot recently because of a boom in U.S. meat production. The U.S. hog herd ballooned to record size, while poultry and egg production also climbed. And, you guessed it, those pigs and chickens get fattened up on good old American yellow grain.

Meanwhile, the fall harvest problems tightened supplies and helped to underpin a pick up in cash prices. Farmer Peterson, for example, has about 1,000 acres of corn sitting unharvested from last season after rain and snow foiled his gathering work.

Corn plantings this season will be supported by “new crop prices that are relatively favorable,” Robert Johansson, the USDA’s chief economist, said in a speech Thursday at the agency’s annual outlook forum.

Across most of the Midwest, farmers have two choices when it comes to planting: corn or soybeans. They could also let acres lie fallow, but that’s usually a bad move for soil maintenance and it may also end up hurting them when it comes to federal aid.

Given the recent economics, it’s not surprising that corn continues to win out. The University of Illinois in January estimated that farmers in the northern part of the state could lose an average of $31 per acre of corn and $81 per acre of soybeans in 2020.

As far as soybeans are concerned, “we’re dribbling sales to China,” said Peterson, who is also a director at the American Soybean Association. “It’s significantly better than a year ago, but it’s a far cry from where we need to be.”

Corn prices haven’t done much so far this year, with December futures in Chicago down about 3%. That’s a sign that larger plantings are already priced into the market, Naomi Blohm, senior market adviser at Total Farm Marketing in West Bend, Wisconsin, said by phone.

Still, there are about two months until planting really begins in earnest and that gives farmers some time to change their minds.

The U.S.-China trade deal officially went into effect on Feb. 15. If buyers step up purchasing soon, they could prompt some farmers to tweak acreage plans.

“It would have to be substantial,” Blohm said of Chinese buying.

Bloomberg
Bloomberg

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© Bloomberg
The author’s opinion are not necessarily the opinions of the American Journal of Transportation (AJOT).

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