Planting is well underway across the United States, but even so, we continue to hear debate over this year’s acreage. In the March planting intentions report acres were projected at 91.1 million for corn and 87.6 million for soybeans. These surprised trade as both were under what was expected, and for soybeans, were less than needed to produce a crop large enough to satisfy projected demand.
The question now is what we may see for changes to acreage now that planting is underway. Initially it was thought that we would see an early start to corn planting and acres would increase. Trade is now less optimistic of this happening after a cool start to the planting season. While conditions were not extreme, they were not what would be considered conducive to elevated corn acres.
Another factor in the acreage debate is that in some cases, soybeans were seeded ahead of corn this year. One reason for this is to try and capture the inverse between old and new crop values. If soybeans can be harvested during the old crop marketing year, they can generate up to $1.00 per bushel more than in the new crop months. Another reason is that in recent years we have seen a well-defined trend of higher yields on earlier planted soybeans. This may actually give the United States more soybean acres than thought while keeping corn plantings the same, or even decreasing them.
There is another theory in why this year’s acres on a whole were less than expected. Total plantings of corn, soybeans, and wheat are projected to be up from last year, but nearly 4 million fewer than initial outlooks indicated. This is being credited to last year’s government programs that rewarded heavy plantings. Thoughts are US farmers planted more acres than normal a year ago because of this and are now focusing more on their traditional acreage rotations.
Now that we are in the growing season more interest is being placed on weather. For the most part conditions are favorable across the United States, but some outlook models indicate we will see a warm, dry growing season. We are seeing the addition of risk premium to futures because of this. Risk premium is the practice of buying futures in case of adverse conditions that may impact yields and crop production later in the year. Given the forecast for tight stocks to use on both corn and soybeans we may see more of this activity this year than those in recent history.
We are starting to see a shift in market attention from soybean balance sheets to corn figures. Given the lower acreage numbers being predicted by the USDA and concerns over yields have some new crop carryout estimates down to 1.2 million bu. Even this may be too high if acres shift to soybeans as the market has indicated may happen. Some models indicate the new crop stocks to use ratio on corn could drop to 5% by the end of the 2021/22 marketing year. This possibility is keeping an elevated volume of risk premium in the corn market.