Expert analyses US crop situation in 2009

Farm Chemicals International spoke with Sano Shimoda, owner and founder of BioScience Securities in Venice, California, US, regarding the nationwide drop in acres planted for 2009 predicted by USDAs National Agricultural Statistics Service (NASS). According to the new NASS figures, total area planted to principal crops nationwide is expected to decline by approximately 7.8 million acres, or 2.4%, from last year. Soybean acres are projected at 76 million in 2009, slightly ahead of the 75.5 million acres planted last year. Growers plan to plant 85 million acres of corn, down 1% from last year and down 9% from 2007.

Wheat acreage is expected to decline 7%, to 58.6 million acres, and cotton plantings are also expected to be down 7%, to 8.8 million acres – the smallest area since 1983.

FCI: What does this nationwide drop in acreage mean for crop protection?

Shimoda: The 7.8% decline in acreage planting expectations for the major crops was widely expected due to a combination of factors: (1) farmers’ decisions to not farm marginal acreage brought into production during 2007- 08 when commodity prices were high; (2) the bursting of the “ag bubble” in mid-2008, which has placed farmers in a significant price/cost squeeze, with increased risks; (3) the impact of the global “super recession” has not only weakened crop demand, but has also created significant credit restraints. Given farmers’ price/cost squeeze, which is likely to intensify in 2009, farmers will be looking to reduce costs and risks, including the use of crop protection chemicals, while at the same time recognizing the need to maximize yields. In the Midwest, I would expect farmers to increasingly use lower priced generics, which will place competitive pressures on many branded products. The best example is glyphosate, where in the Midwest generic glyphosate is currently selling at a substantial discount, of as much as US $4-$7/acre below branded products.

FCI: What does it mean for demand abroad?

Shimoda: Crop protection demand and pricing is much more vulnerable in global markets, outside the US, due to the farmer’s price cost squeeze, similar to the U.S, and most importantly, greater limitations on credit, due to the global credit crises.

FCI: How accurate do you feel these numbers are?

Shimoda: While total US planted acres, probably will not change much, the mix of different crops (especially corn/soybeans/wheat) could change, depending on the degree to which the current cold/wet weather conditions persist in mid-late April. Although Midwest farmers can plant their acres in a hurry due to the size of their equipment, the key determinants will be continued adverse planting conditions (which will promote more soybeans and less corn), but also the trend in future prices over the next 30-45 days. Soybean prices have been buoyed by strong seasonal demand from China, which is expected to moderate, as South American production comes on to the market in the next few months. US corn prices could continue to suffer due to a further weakening in demand tied to a continued deterioration in the global economic outlook, a continued strong US dollar (due to continued global financial concerns) which will be a negative for US corn exports, and continued weak ethanol markets tied to oil prices remaining low. These market trends could cause a greater shift from corn to soybeans in lower yielding production areas.