The price of a bushel of corn hit a record $5.79 on March 11, even after a year in which American farmers planted 92 million acres with maize -- the most since World War II.
So one might assume, at first glance, that farmers would plant even more corn this year.
Actually, no. The USDA's highly influential "Prospective Plantings" report predicts that U.S. farmers will decrease acreage devoted to corn by 8 percent in 2008, down to a mere 86 million acres. The new fave: soybeans. The USDA forecasts that soybean acreage will jump 18 percent, to 75 million acres.
The switch is partially explained by rising soybean prices, which also registered record highs in March. One reason for the surging soybean prices is obvious -- the rush to corn last year resulted in a decline in the soybean harvest, and less supply in a world of growing demand for all agricultural commodities equals higher prices.
But the key phrase in the USDA report explaining the switch comes in the middle of one sentence buried near the end.
Expected acreage is down from last year in most States as favorable prices for other crops, high input costs for corn, and crop rotation considerations are motivating some farmers to plant fewer acres to corn.
That's fertilizer, folks -- corn needs a lot of it, especially nitrogen. Soybeans, in contrast, add nitrogen to the soil.
As the extent of last year's corn bonanza became clear, some observers worried that farmers, lured by high corn prices, were abandoning their customary corn/soybean rotation and putting the long-term soil fertility of their land in serious peril. But when synthetic fertilizer prices also spike to record highs, it puts a cap on how far farmers can head in such a direction. Corn, ultimately, could be its own worst enemy.
Another tidbit from the USDA report: Acreage devoted to oats hit an all-time low -- a paltry 3.42 million acres. The USDA did not explain why, but some additional research indicated that the decline and fall of oats has been in motion for a long time. A New York Times article from 1993 offers a comprehensive look and pins part of the blame on screwed up farm subsidies, but the real villain is a lack of horse appetite. Ever since the horse lost out to the automobile and tractor, oat production has been in freefall.
Oats: The original transportation biofuel.