Shift from corn to soy acreage eyed as fertilizer costs skyrocket

The last time fertilizer prices rose steeply, in 2008, farmers switched millions of acres from corn to soybeans, along with some winter wheat. Is a similar switch being considered for the 2022 plantings?

There’s no question that the costs of all farm inputs, especially fertilizer, have skyrocketed. In a recent webinar, James Mintert, director of the Center for Commercial Agriculture at Purdue University, said that according to the latest figures in the World Agricultural Supply and Demand Estimates released by the U.S. Department of Agriculture, input costs for corn production had increased by $1 per bushel in one year; he called that increase “unprecedented.” Mintert cited a recently quoted price for anhydrous ammonia of $1,350 per ton. Phosphorus, potash and nitrogen prices have also increased.

“I’ve never seen as rapid a rise in production costs for corn in one year,” said Mintert. It’s not just fertilizer; glypohosate jumped from $14 a gallon to $50 in one year.

Michael Langemeier, professor of agricultural economics at Purdue, pointed out that the price increases in fertilizer and inputs generally are occurring worldwide. That means that not only United States farmers, but producers in Brazil, the Ukraine and Russia will face similar choices during planting season. Langemeier used the University of Iowa Corn Nitrogen Rate Calculator to estimate total fertilizer costs per acre of corn in the United States at $250, plugging in a price for anhydrous ammonia of $1,200 per ton.

The Nov. 9 WASDE corn outlook was for slightly higher production, increased exports, lower feed and residual use and larger ending stocks. Corn production was forecast at 15.019 billion bushels, up 23 million bushels on a marginal increase in yield to 176.5 bushels per acre. With supply rising and use falling, corn ending stocks for 2021-22 are increased by 92 million bushels. With corn use rising slightly more than supply, corn ending stocks were lowered by 7 million bushels.

Mintert did offer two mitigating factors he said should be considered before farmers “throw in the towel” on corn. He sees continued strong ethanol demand and continued strong export demand for corn. He said he expects ethanol plants to boost their bids during the fall and winter. The WASDE estimates reported that corn used for ethanol was up by 50 million bushels, based on September data from the Grain Crushings and Co-Products Production report and weekly ethanol production data as reported by the Energy Information Administration for the month of October.

Soy protocol approved

Jim Sutter, CEO of the Unites States Soybean Export Council, hosted USSEC’s Nov. 9 webinar from Dubai, where he was promoting U.S. soybeans. He began by noting that the European Feed Manufacturers’ Federation has again approved the U.S. Soybean Sustainability Assurance Protocol as being compliant with their sustainability guidelines. Such approvals are increasingly important, said Sutter, and cited the European Commission’s proposal for certifying soy supply chains as not only sustainable but “forest free”—i.e., not requiring the clearing of rain forests.

Soy yield surprise

The latest WASDE did contain one surprise for soybean watchers: a reduction in estimated yields, especially in Ohio and Indiana. Overall, soy yields were revised downward by 0.3 bushels per acre, for a revised total of 51.2 bushels per acre—a decrease of about 23 million bushels. That left soy ending stocks at 10.3

Lower than expected yields in Indiana, Iowa, Ohio and Kansas account for most of the change in production, while Nebraska, Minnesota and South Dakota had better than expected yields.

Kevin McNew, chief economist at Famer’s Business Network, attributed the lower yields in the eastern end of the Corn Belt to more cloudy days, reducing solar radiation. But “Nebraska farmers knocked [yields] out of the park,” said McNew. He said some of the USDA’s pullback on export numbers was due to the disruption caused by Hurricane Ida.

Soy export estimates were reduced, reflecting reduced global imports and lower-than-expected shipments through October. With use falling more than supply, soybean ending stocks were raised 20 million bushels.

The yield revisions left the overall soy crop still big, at slightly below the 2018 crop, but not at the record levels forecast earlier in the season.

Farmer reports

This year, USSEC featured three producers in its WADE webinar, representing three different areas of production. Bill Bayliss of west central Ohio, Kevin Mainord who farms in Missouri’s bootheel, and Clay Goiver in Nebraska are all USSEC directors. Bayliss reported his farm’s best yields in soybeans and corn, although he said not all his neighbors set records. His input costs have almost doubled, and he does indeed plan to plant more soybeans next year, he said. He will also be looking at no-till, cover crops and other practices to reduce fertilizer use and maintain soil health.

Mainord also reported “fantastic” yields for soybeans. His family is also involved in ag retail, and he predicted a “big soybean year.”

Goiver said Nebraska soybeans were 95% harvested by Nov. 9, with above average though not record yields, although he said the state overall may have set a record.

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When host Jim Sutter asked what innovations they expect to see in the next five years, Bayliss mentioned improved genetics and using drones for scouting. Mainord said precision ag “has grown by leaps and bounds,” and that will be his operation’s big focus.

Ag energy co-investments

Finally, Mac Marshall, vice president-market intelligence for the United Soybean Board and the USSEC, mentioned the surge in interest in renewable diesel and the “wave of announcements” of joint co-investment projects between Big Ag and energy companies.

In September, Bunge announced that its joint venture with Chevron is expected to double the capacity of Bunge’s soybean processing facilities in Destrehan, Louisiana, and Cairo, Illinois from 7,000 tons per day by the end of 2024, with Chevron providing 50% of the financing.

In August, ADM and Marathon announced the expansion of ADM’s processing complex in Spiritwood, North Dakota, with ADM owning 75% of the joint venture and Marathon owning 25%.

When complete in 2023, the Spiritwood facility will source and process local soybeans and supply the resulting soybean oil exclusively to MPC. The Spiritwood complex is expected to produce approximately 600 million pounds of refined soybean oil annually, enough feedstock for approximately 75 million gallons of renewable diesel per year.

Marshall said the uptick in U.S. processing for biodiesel offered international buyers of U.S. soymeal a “great opportunity.”

David Murray can be reached at [email protected].