Bumper U.S. crop planting may tame high food prices

Reuters News
Posted: Mar 28, 2011 4:07 PM
Bumper U.S. crop planting may tame high food prices

By K.T. Arasu

CHICAGO (Reuters) - The bumper crops expected to be planted by U.S. farmers this spring could be the first big step toward alleviating global food price inflation.

After drought and torrential rains in 2010 devastated major crops from Russia to Australia, all eyes will be on the U.S. government's plantings report on Thursday for a glimpse of production prospects from the world's top grain exporter.

Analysts polled by Reuters are expecting U.S. farmers to plant second largest area of corn since World War Two and the third most acreage of soybeans ever.

The U.S. Department of Agriculture forecast in February at its annual Outlook conference that U.S. farmers will seed an additional 10 million acres with major crops this year.

Soaring prices have been a crucial incentive for farmers to rush to sow more acres. Cotton futures rose to an all-time high this year and grains are hovering around their highest levels since the food crisis of 2008.

Demand for corn to make ethanol has increased to record levels, the livestock sector's profitability has shot up while China's demand for soybeans remains unsatiable and Beijing is believed to have resumed its import of corn from the United States.

"It could be step one in curing record high food prices," said Darrel Good, an agricultural economist and professor emeritus with the University of Illinois at Urbana-Champaign.


Analysts polled by Reuters were expecting U.S. farmers to plant 91.839 million acres of corn this spring, the second largest area of the post-war period, and up from last year's 88.192 million. The USDA forecast 92 million acres at the annual Outlook conference near Washington D.C. last month.

Farmers were expected to seed 76.870 million acres with soybeans -- which would be exceeded only by 2009 and 2010 -- down from last year's 77.404 million acres and lower than the USDA's February forecast of 78 million.

Analysts were expecting wheat to be planted on 57.289 million acres, up from last year's 53.603 million and above the USDA's February forecast of 57 million.

"The biggest question is if farmers can come up with an extra 10 million acres," said Mark Kessler of Harvest Equity who is a consultant to farmers on risk management.

"From what I see, the cropland in Indiana, Illinois and Iowa is already being cropped fully," he said, alluding to an absence of marginal lands that can be brought into production.

Analysts are divided over whether there is an additional 10 million acres that can be brought into production this year.


Grains analyst Dan Basse of AgResource Co. said there is little room for surprise in the USDA report on Thursday.

"The key is, do we have the total acreage base?" he said, referring to the additional 10 million acres.

Analyst Don Roose of U.S. Commodities said land which has been lying fallow for years is coming into production.

"We think farmers want to stay in rotation as much as possible, but if you look at the profit potential, we see acreage flexing to corn where at all possible because the profit's a lot bigger (than soybeans)," he said.

"We did see some of these marginal land acres coming into production out of pasture, some hay," he said.

Randy Mittelstaedt, a grains analyst at R.J. O'Brien, said the report could set the price trend for coming months.

"This report is going to be the watershed moment for the markets for the next couple of months. It is going to say 'we deserve to be here or we don't deserve to be here (at these price levels.'"

(Additional reporting by Sam Nelson, Mark Weinraub and Suzanne Cosgrove; Editing by Alden Bentley)