Saturday, February 18, 2012

Row crop history - the changing distribution of crops


The total number of acres planted with row crops has been fairly steady over the last 30 years. The increase in the late 70's matched the price surge from the bad world harvests in the early 70's. This lead to the farm land bubble and financial disaster in the early 80's. There is a limit to the amount of land that can be planted. There has been urban sprawl which has taken out land. Government conservation land programs have also fluctuated over time. Assuming that there is no new land, the problem with row corp price prediction is determining the relative price based on the substitutability of planting. 

The major trend has been the movement to just three major crops in the US, corn soybeans and rice. Corn as a percentage of the total acreage has increased with the development of ethanol production. This has been from a decline in the 60's and 70's. Soybean has been the wonder crop since the end of WWII. Wheat has declined and cotton has been fairly steady. The decline has come at the expense of sorghum, barley, and oats. With higher prices and profits in corn, there will be more substitution to this cash crop. It will come out of the acreage from soybeans which has created the interest in corn soybean spread trades. 

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