By Edward Usset, University of Minnesota Extension

Soybean plantings will likely increase by two million acres or more in 2014, indicating reason to be nervous about new crop soybean prices in the months ahead.

It's reasonable to assume a large increase in soybean acres this year. That's because November 2014 new crop soybean prices are at a favorable level related to December 2014 futures of new crop corn. The resulting greater supplies could lead to much lower soybean prices by harvest.

Despite this outlook, November 2014 futures prices are currently close to a profitable level compared to production costs.

When the new crop price of soybean is high relative to new crop corn, farmers naturally increase soybean planting. For example, in 2004 and 2006 farmers increased soybean plantings by 1.8 and 3.5 million acres, respectively.

What happens to new crop soybean prices when farmers plant more soybeans?

There have been 14 years since 1980 when November soybean futures led farmers to increase soybean plantings by at least two percent. For perspective, a two percent increase in soybean plantings in 2014 means an additional 1.6 million acres of soybeans -- not a particularly large increase. In 12 of the 14 years, November soybean futures prices were substantially lower at harvest compared to price levels the winter before.

Corn prices are low. Wheat prices are establishing life-of-contract lows nearly every day. I am averse to price 2014 corn or wheat because new crop pricing opportunities are well below production cost. It is possible that early soybean sales will be an only opportunity to price any new crop grain before the harvest of 2014.

With wheat prices in very poor condition, soybean prices are just as favorable compared to wheat. Farmers in the northern Plains, such as North Dakota and South Dakota, have an equally strong incentive to plant more soybeans.