Amid a volatile week in a number of markets and more talk about recession and bear markets, it may be hard to remember that there’s a war going on – not a shooting war as in Iraq or Afghanistan but a war over planted acreage in the U.S. heartland.

Some have declared the bull market in grains and soybeans and commodities in general – notably oil and metals – is over, and it was easy to think that way after limit-down days last week. But, almost as quickly, there were limit-up moves so one can’t be too sure about any long-term trend. Many of the headlines center on the near-term, 2007 crop contracts, but the real battle involves prices for 2008 crops. Which market will be the most attractive at planting time?

That question still seems to be far from resolved. After last week’s erratic price action and talk about the seasonal “February break,” new-crop corn prices lost only 5 cents a bushel for the week and new-crop soybeans 20 cents. So little has been decided yet.

Hard red winter wheat is already in the ground for 2008. The main factor here is weather, and you can expect the crop will be “killed” at least several times before harvest, if past history is any guide. The main battle is between corn and soybeans and, to a lesser extent, spring wheat traded in Minneapolis and cotton.

We are still more than two months away from the U.S. Department of Agriculture’s first official estimate of acreage for 2008, the planting intentions report due March 31, but several of the most knowledgeable sources are already out with their estimates. As you see the play back and forth in prices during these cold months, keep these estimates in mind when you look at what farmers, analysts and traders are thinking about 2008 crops:

American Farm Bureau economist Terry Francl – 88 million acres of corn and 69.5 million acres of soybeans.
Informa – 90.048 million acres of corn and 68.97 million acres of soybeans.
Pro Farmer – 88.17 acres of corn and 71 million acres of soybeans.

The estimates may look about the same, but just small shifts from these guesses could have big impacts on prices because the lower end of acreage estimates may not be enough to cover projected usage next season. And that’s with trendline yields. If the current La Nina condition (cold Pacific Ocean water) continues into July, odds are high for drought in the Plains and below-trend yields, according to some long-range weather forecasters.

Which will give first? Prices? Acreage of one crop or another? Demand? Look for 2008 to be a very interesting, volatile year for agricultural markets.