For years, corn in the Mid-South, to borrow a phrase from comedian Rodney Dangerfield, didn’t get no respect — income prospects were low in comparison to other crops, so few growers opted for corn.
“But with the prices we’ve been seeing and the widespread ability to irrigate corn, producer expectations of income from the crop have risen dramatically in the last two to three years,” says John Anderson, Extension professor of agricultural economics at Mississippi State University.
The result has been a sharp upward trend in corn acres, most of it at the expense of cotton.
“It’s much the same with soybeans — we’re seeing some fairly large gross income numbers for the crop compared to five or six years ago,” he said at the Mississippi Farm Bureau Federation’s summer cotton policy meeting, held jointly with the Mississippi Boll Weevil Management Corporation.
Which has meant an even larger chunk taken out of cotton, with acreage in the state this year pegged at only 365,000 to 370,000.
Anderson, who has analyzed the competitive balance sheets for cotton, corn, and soybeans, said the cotton market “has struggled the last couple of years” with stocks at “very burdensome levels” and a declining domestic market, and this spring with concerns about futures markets margin rules.
“There has been a fairly significant downward trend for cotton as the market has tried to absorb what’s going on in all the commodity sectors,” Anderson said.
But, he noted, the widespread shift of acres to corn and soybeans, the resultant decline in cotton production and stocks, and USDA’s projection for an increase in global mill use, points to “a little more favorable situation” for cotton in 2009.
“In 2009 and beyond, it seems reasonable to expect quite a bit of support for cotton prices” as a result of these shifts in production, Anderson said. “In terms of where the markets are now, we could see quite a bit of improvement in cotton prices looking at the 2009-10 marketing year.”
In fact, he noted, “futures prices for all crops are high as far out as contracts are traded — it’s really remarkable, and says a lot about what the market thinks about future demand and use.
“The expectations in recent months are that these prices will be supported for the next two or three years.”
And Anderson said, “We’re seeing on-farm storage continuing to increase in the Mid-South, and once that infrastructure is in place, it could work in favor of a more lasting shift into grains.”
The competition for water and other resources to produce the crops “is going to be a lot more fierce,” he said.
Following a 2007 corn crop of 13 billion bushels, “nearly all of which was used,” Anderson said “nobody has any real handle” on what’s shaping up for this year’s crop.
“It’s expected production will be down a lot from last year, with not much change in usage, so everybody’s looking for a tight balance sheet, which should provide very strong support for prices.”
Soybeans have gone from a record carryover in the 2006-07 marketing year to current very low stocks, creating “an expectation of strong prices,” Anderson said.
“I would guess there will be a lot of soybeans next year.”
Extremely high production costs are a fact of life for all crops, he noted. “Soybean production costs have increased steadily, but not at the same rate as for cotton and corn, with fertilizer being a major cost component for the latter two crops.”