If you happen to’re a corn and soybean grower or commodity futures dealer, one of many largest watershed days of the yr is looming: On March 31, the U.S. Division of Agriculture will launch its report on potential plantings.
The eagerly awaited report is the world’s first take a look at USDA’s finest estimates for the approaching yr’s seeded space of main U.S. crops like corn, soybeans, wheat and cotton. Market bears and bulls often discover sufficient information within the report back to rock costs for weeks.
This March’s numbers are much more anticipated than common, as main agricultural markets like corn, soybeans and wheat – pushed by shrinking U.S. provides and continued sturdy international demand – submit their finest performances since. years.
Which means that American farmers may be capable to do what they do finest – plant giant acres and produce giant crops with out costs falling to scary ranges.
Simply what dimension?
The USDA supplied a snapshot of acres planted in 2021 in its Discussion board Outlook in mid-February. In spherical numbers – none associated to precise survey information – he assumed that U.S. farmers might plant 92 million acres of corn, 90 million acres of soybeans, and 45 million acres of wheat. winter and spring. If appropriate, the mixed corn and soybean space, at 182 million, would surpass 2017’s document 180.3 million acres.
Extra importantly, the USDA’s 2021 soybean estimate is 6.9 million acres greater than what U.S. farmers sowed in 2020. Whereas that is an enormous enhance, (the combination harvest, estimated at 4.5 billion bushels, is up 9% from final yr) USDA estimates that 2021-22 Soybean costs will common $ 11.25 per bushel, or “Barely” higher than final yr, as extra farmers will use in the present day’s good ahead costs to cost tomorrow’s crop.
Nicely, that may hope.
Equally encouraging is the place soybeans get the acres. The USDA believes that in the present day’s excessive costs will entice some acres of Northern Plains spring wheat to soybeans (doubtless) and that almost 2 million acres of predicted cotton will, as a substitute, be planted in soy. (Simply as doubtless.)
Additionally, the “unusually excessive degree” of unplanted acres within the Midwest over the previous two years will return to “regular” and soybeans will develop on lots of them. (That is what the USDA seems like when it guesses.)
That is the case in February, and not using a survey of the farmers.
The March report on potential plantings, surveyed by farmers, might verify this bias, market specialists imagine. If that’s the case, in the present day’s November futures market, which dances round $ 12.50 a bushel, seems snug with an estimated 90 million acre soybean crop on the horizon. .
After all, if the USDA finds over 90 million acres forward, futures costs might endure.
The upside of that cloud, nevertheless, is that including acres of soybeans means fewer acres of corn as a result of the acres have to come back from someplace. So what’s unhealthy for beans might be good for corn.
However will farmers hand over acres of corn to develop extra soybeans in 2021?
That could possibly be an uphill battle, write Brent Gloy and David Widmar in a March 15 weblog submit for his or her firm, Agricultural Financial Insights, or AEI.
Easy calculations (utilizing Purdue College 2021 crop budgets) present a transparent revenue benefit of $ 20 per acre for rising soybeans over corn, primarily as a result of the variable prices of rising beans ( $ 249 / acre) is significantly decrease than corn ($ 436 / acre). .
However what occurs to that benefit when each corn and soybeans have sturdy markets, like this yr, and – for the sake of argument – you might be having a bumper yr of manufacturing? In different phrases, what’s the “working lever” of 1 tradition in comparison with one other in good years?
For the AEI staff, the benefit then goes to corn. They put it this manner: “In 48% of the observations, or about half the time, corn would generate a bigger contribution margin than soy, even with an ‘on common’ benefit of soy.”
Most farmers articulate this idea in another way. They put it this manner: “simply favor to plant corn, all different issues being equal”, as a result of in actual fact, in years like 2021, all is just not equal: corn generally is a large winner.
However betting on it might be like betting on the Potential Plantings report. No thanks, however good luck.
The Farm and Meals File is revealed weekly in the US and Canada.