Historically, the harvest futures price from December 1 to March 31 can be a key predictor of planted acreage for spring crops. From 2010 to 2021, the monthly average futures price from December 1 to March 31 for soybeans (SX) divided by corn (CZ) has been 2.39, and corn (CZ) divided by cotton (CTZ) has been 5.85. A soybean-to-corn price ratio below 2.39 would tend to favor planting corn over soybeans and a corn-to-cotton price ratio above 5.85 would favor corn over cotton (Figure 1). So, with relative prices favoring corn and cotton, should we expect a reduction in soybean acres in 2022? Maybe not.
Figure 1. December 1 to March 31 monthly average futures closing price ratio for the harvest contract (December = Corn; Soybeans = November; and Cotton = December), 2010-2022*
Commodity price ratios may not dictate producer decisions on what to plant in 2022. Instead, input cost and availability may be the driving force. High input crops, like cotton and corn, are at a disadvantage compared to lower input crops like soybeans and sorghum. High input prices reduce profit margins, and potential lower input availability increases production risk.
Using fertilizer as an example, retail prices (Figures 2 & 3), are up 62-176% compared to last November. To put this in context, from 2010 to 2020 for the Mississippi Portal Region, USDA ERS estimates the cost of fertilizer to be 4.49 times more expensive for an acre of corn than for an acre of soybeans and 2.64 times more expensive for an acre of cotton compared to an acre of soybeans. As such, a doubling in fertilizer prices can add $100-150 or more per acre to producer’s production costs for corn, whereas for soybeans, fertilizer costs may only go up $20-35 per acre with a doubling of fertilizer prices. Producers will need to estimate profitability and risk for each commodity when making planting decisions.
Figure 2. Select weekly fertilizer prices November 2019 to November 2021
Figure 3. Select weekly fertilizer prices November 2019 to November 2021
Smith, Aaron. “Input Price and Availability is Influencing 2022 Planting Intentions“. Southern Ag Today 2(3.1). January 10, 2022. Permalink