T he recent discovery of soybean rust in the United States has prompted many agricultural pundits to predict more corn acres will be planted in the coming crop year. While soybean rust may cause some shift from soybeans to corn, producers have already begun such a shift and will likely continue regardless of the presence of soybean rust. Figure 1 shows that Iowa soybean acreage reached its peak in 2001. Since then, corn acreage has risen by nearly 9 percent while soybean acreage has declined by over 7 percent. Three major factors explain this shift: trend yields, variable costs, and prices. If we look at these factors over the past several years, corn has outpaced or matched soybeans in all three areas. Corn trend yields are growing relatively faster than are soybean trend yields. Variable costs of production for corn are maintaining a consistent margin with those for soybeans. Futures prices for corn are relatively stronger than are those for soybeans.

Republicans control both houses of Congress as well as the presidency. Control means accountability, and large federal budget deficits do not harmonize with the Republican self-image of fiscal prudence. Thus, one of the top agenda items this spring and summer will be how to reduce the federal budget deficit.

The World Trade Organization (WTO) negotiations under the Doha Round are slowly progressing toward an eventual new agreement on agriculture. A new framework for the agriculture agreement was approved by the WTO membership in August 2004. The changes in the guidelines for domestic support could have effects on many countries and many types of support. However, details on the specific regulations of the agreement have yet to be determined. Dramatic reforms in agriculture could take place under the framework, but the decisions made to implement the framework will determine if that potential is realized. If countries lack ambition and commitment to make genuine reforms, changes in support will not happen in this round.

The United States is the fourth-largest producer of sugar and has well-developed sugarcane and sugar beet industries. However, since the 1970s, high fructose corn syrup (HFCS) has gained popularity with food processors as a sweetener, a change stimulated by sugar agricultural policies that have raised the price of sugar well above its world level, and the emergence of cheaper sweeteners based on corn. Nearly 7.3 percent of total corn production (2.2 million bushels) was used to produce HFCS in 2003/04. The United States is the world’s lowest-cost producer of HFCS, partly because of access to cheap corn at or below world market prices and low unit costs in large plants. HFCS represents an increasing share of per capita caloric sweeteners delivered for domestic food and beverage use.