As the acreage battle heats up, it's already moving prices, but so far, not many are aligned with USDA’s initial forecast.
“Well, I guess they must have legalized marijuana in Washington D.C., because I don’t' see it at all,” Mark Gold told the audience at the U.S. Farm Report taping during Commodity Classic.
We’ll get USDA’s first taste of what farmers are thinking on March 31st. Like with each report, it's a gamble, but many analysts are betting on a record number of soybean acres.
“In my opinion, right now, guys are leaning heavily towards beans, especially in fringe areas,” says Matt Bennett with Bennett Consulting. “I know in the Delta they are going to be heavy beans. There's no areas that I’ve been, and I do some work with seed companies where I’ve talked to sales manager, and they've been able to tell me that they are going to sell more corn this year than they did last year. No areas."
“I'm looking for soybean acres to be up 2.5 to 3.5 million acres from 2014,” says Arlan Suderman of Water Street Solutions.
Not everyone is jumping on the more soybean bandwagon just yet, saying it pays to plant corn.
“I'm sort of the odd man out here, not looking for huge bean acres but looking for a little bit stronger corn acres,” says Ted Seifried, with Zaner Ag.
“I think it's worth the risk to plant more corn,” says Andy Shissler of S&W Trading. “The upside on your yield is better and if we're in a declining stocks situation, potentially, with a loss of acres, then I’m not afraid of the price.”
“The scary thing is that soybeans can barely generate enough revenue to cover high rent costs,” explains Pro Farmer’s Chip Flory. “So, in those situations, we're going to be looking at corn dominating the high rent areas. “
If USDA agrees with more corn, it could throw a curve ball into the market.
“I think if we don’t' see a record soybean acre number from USDA, that would be the shocker, because we've been sort of factoring that in for a long time,” Seifried says.
With so much talk of an acreage shift, what's turning into an even bigger debate is crop size. Some say even if we have record soybean acres, that doesn't translate into a record crop.
“Yes we are going to have a higher acreage number for soybeans, record in fact, but we turn to normal yields, and therefore, we have production at about 111 under last year,” explains Rich Nelson, Allendale, Inc. Chief Strategist.
Looking at corn, a change in yield could spur a major price swing.
“If we add 5 percent to the national average corn yield, we're probably looking at a $3 corn market, and i mean low $3 corn market,” says Flory. “Now, on the other hand, if you take 5 percent off of the national average trendline corn yield, now all of a sudden we're talking about a $5 corn market again, because of carryover is going to be something very close to 1 billion bushels."
With lower commodity prices, increased competition from other crops could also eat into the acreage numbers. Some analysts think that's why we'll see lower numbers all around.
“I'm in the camp that total acres are going to be down,” says DuWayne Bosse with Bolt Marketing. “You know, up here, especially in North Dakota, we can plant a ton of different crops. We can shift to the oats, the barley the pintos, you know, anything else. And I think that's what farmers are going to do now with tight prices and tight profit margins."
One crop that could be used in rotation is wheat.
“I've heard that there are some more people going to plant spring wheat,” says North Dakota farmer Kerry Baldwin.”
“Hard red winter really surprised me, being as far down as it was, and a lot of that will go into grain sorghum,” says Suderman.
China’s increased appetite makes sorghum an attractive option this year.
“It's a high risk for farmers, but right now with the strong basis, they are taking that risk and planting it, says Suderman. “I think primarily the shift is going to be in the Plains with a little bit in Delta and Mid-South will see a shift to some sorghum, that will contribute to weakness in corn acreage.
As everyone prepares for USDA’s report, it could be a short-term market mover. But once the crop is in, the outcome will depend on the cards Mother Nature deals this year.