U.S. farmers this spring will seed the largest area with corn since World War Two as a mild and dry winter has raised expectations for a quick planting this spring, a Reuters poll of 24 analysts showed, signaling a boost to razor-thin stocks and lower prices in 2012.
The survey showed that farmers were gearing up to plant 94.2 million acres, which could produce a record crop of 13.8 billion bushels based on a trendline yield of 161.4 bushels per acre. It would surpass the previous record of 13.1 billion in 2009.
Farmers were expected to plant 75.3 million acres with soybeans, up slightly from last year's 75 million.
Seeding of corn, used primary as livestock feed and to produce the gasoline additive ethanol, kicks off in the southern states in March and winds its way up to the Midwest grain belt in April as the winter weather thaws into spring.
The analysts polled said a higher profitability in growing corn versus soybeans would fuel the acreage expansion, along with areas that could not be seeded last year due to excessive rains coming back into production in 2012.
An average of 24 analysts in a Reuters poll on Monday pegged corn area at 94.2 million acres, 2.5 percent above last year's plantings of 91.9 million and 0.75 percent above the second-biggest area since 1944 of 93.5 million sown five years ago.
The U.S. Agriculture Department will release its first projections of corn and soybean plantings later this month. Its monthly crop report on Thursday morning is expected to project that U.S. corn ending stocks for the 2011/12 crop year will shrivel to 791 million bushels, a 16-year low.
"If you look at the breakeven, you make so much more money raising corn than anything else," said Sid Love, analyst for Kropf & Love Consulting. "It is not even a contest. By far and away, the best crop is corn."
Farmers in central Illinois are expected to make a profit of as much as $578 per acre by planting corn in 2012, according to a University of Illinois study. The least-profitable corn scenario -- where farmers have abandoned crop rotation and planted corn year after year -- is $467 per acre, still above the $425 per acre best-case scenario for soybeans.
Forecasts for big corn yields in central Illinois -- ranging from 180 to 198 bushels per acre -- are the key to corn's advantage over soybeans. The cost of growing corn is higher than the cost of growing soybeans, mostly due to fertilizer, pesticide and seed expenses, the study said.
The study, which was issued at the end of January, assumes corn prices of $5.35 per bushel and soybean prices of $11.85 per bushel.
Corn futures closed at $6.44-1/4 per bushel on Monday. Price are nearly 60 percent above five years ago but remain 20 percent below the all-time high of $7.99-3/4 set last summer.
CORN DEMAND REMAINS ROBUST; PRICES STRONG
Brisk demand for corn from the feed, export and ethanol sectors combined with a crop shortfall last year shrank the supply of corn in the United States to the lowest in 16 years.
And a drought in Argentina, the world's second-largest corn exporter, that has slashed output has kept corn prices strong relative to soybeans, leading to expectations for a large corn area this year.
"Corn is roughly $100 per acre more profitable than soybeans. That's been the case for three consecutive years. Also a lot of acres weren't planted last year because of wet weather especially in the eastern Midwest," said Bill Nelson, analyst for Doane Advisory Services in St. Louis, Missouri.
"A poll of our subscribers indicates an increase in corn area and less beans, especially in the eastern Corn Belt where they had a lot of rain last year," he said.
PRICE RATIO FAVORS CORN OVER SOYBEANS
Analysts said the ratio of Chicago Board of Trade (CBOT) new-crop December corn and new-crop November soybeans currently at about 2.1 was a good reason to plant corn instead of soybeans.
"The big price advantage is for corn acres. If the price ratio is close to 2.0 it favors corn and close to 2.5 it favors beans," said Michael Cordonnier, an agronomist and president of Soybean and Corn Advisor in Hinsdale, Illinois.
Additionally, the mild winter weather currently signals a drier spring than last year, helping increased corn plantings.
"It's been dry in the western Corn Belt and typically when it's drier in the spring, farmers plant more corn than soybeans," Cordonnier said.
"There were a lot of acres that didn't get planted last year because of wetness and those will come back into production."
The excessive wet weather during spring planting season last year led many farmers to abandon corn seedings in favor of soybeans or other substitute crops.
Cordonnier also said a lot could happen between now and planting season. "Farmers are making later decisions now than in the past because markets have been so volatile. The volatility the past couple of years has been unbelievable."
SOME CAUTIOUS ABOUT A BIG DISPARITY
Some analysts were a little hesitant about forecasting a huge boost in corn acreage versus soy, citing the huge cost of fertilizer to producer corn compared with soybeans.
"It's a value play. It's a bottom line play. Right now, people are teetering on what to grow," said Bill Raffety, analyst for Pension Futures.
"When corn's over $6.50, people will go with corn. But the input costs are huge. I think you might see a surprise and see more beans being planted. The inputs are less," Raffety said referring to his estimate for 93.1 million corn acres and 75.6 million soy.