On Thursday, March 29, USDA will release its annual Prospective Plantings report. Which crop will claim the most acres?
Soybeans are the top pick heading into the report. “Budgets are favoring soybeans over corn, even with corn prices increasing the past few weeks,” says Katie Hancock, Brock Associates marketing consultant. “Plus, tight cash flow will encourage bean acres because it's cheaper to grow soybeans than corn. So, in terms of profitability and cash-flow, soybeans are enticing.”
On her farm in western Kentucky, Hancock plans to grow 20% more soybean acres than last year. “Corn will only be grown on the best corn ground,” she says. “I'm also heavily priced in soybeans because I think there's more downside risk than upside. I can't justify pushing soybeans acres without a plan to protect myself from price risk. There's an argument that farmers must keep a corn rotation, but no one likes to lose money if soybeans offer better profitability.”
Because soybeans are less-expensive to produce, Dan Hueber, general manager of The Hueber Report, thinks lenders may also urge farmers to plant more soybeans.
“While I do not believe that beans really offer any more economic incentive over corn than they did twelve months ago, another year of financial strain could prompt more lenders to encourage additional bean acreage, seeing it requires less cash outlay in the spring,” he says.
Many early analyst predictions are calling for increased soybean acres. If that doesn’t happen, it could surprise the markets, Hueber says.
“A year ago, we all made the same argument that economically it made sense to expect a larger boost in beans—and that did not materialize,” he says. “At the Ag Forum, the USDA told us they expected to see an even split of 90 million acres each and from a purely statistical standpoint, it is difficult to argue with their reasoning.”
Yet, Hueber expects cash-flow needs will still draw more soybean acres. He expects to see 89.5 million acres of corn, 91.2 million acres of soybeans and 46.4 million acres of wheat in the Prospective Plantings report.
As for other crops, he says, cotton could pull acres away from beans and trim the estimate. “Sorghum prices have rallied nicely over the past year and currently stand at the highest point since July/August of 2015, but I would not expect a major increase in acreage even with the improvement in price,” he adds.
USDA’s acreage numbers will likely move the markets on Thursday. Hancock encourages farmers to also watch exports and carryout. “Acreage isn't the only indicator of price movement,” she says.
Find AgWeb's additional Pre-Report Analysis of March 29 USDA Reports
Read Family Farming-Katie Style, Katie Hancock's blog on AgWeb.
Read The Hueber Report, Dan Hueber's blog on AgWeb.