Spring Planting Preview: Farmers Play Waiting Game With Markets, Mother Nature

 
Spring Planting Preview: Farmers Play Waiting Game With Markets, Mother Nature

This may be one of those years when the March prospective plantings report ends up providing only a hint of the harvests to come.

“This year, more than most, farmers are going to let Mother Nature determine what happens,” says Bob Utterback, Farm Journal economist and the president of Utterback Marketing Services in New Richmond, Ind.

It’s already happening in some states.

In the Delta, rain has significantly delayed field work. According to David Hightower of The Hightower Report, Louisiana farmers have planted just 1% of their crop, far behind their five-year average of 48%. Farmers in neighboring states are dealing with the same problems, with 0% of the corn crop planted versus the customary 16% (Mississippi) and 19% (Georgia).

For farmers who are waiting to plant, though, the weather could affect them in several ways, from when they plant to what they plant and why, based on the grain market’s response. With input costs stubbornly high and crop prices persistently low, neither corn nor soybeans looks all at that profitable to farmers.

“The difference in return between corn and soybeans is narrow,” Hightower says. “Over the last couple of years, corn held a significant profitability advantage and now that is shrinking.” Add in the higher upfront costs for corn, and “there is an element of uncertainty on who is going to plant what,” he says. “This is probably more up for grabs in this particular crop year than we’ve seen in quite some time when it comes to strict profitability.”

It could make for a roller-coaster ride in the market. Overall, the trade expects U.S. farmers to plant fewer corn acres and more soybean acres as compared to last year. For Informa, that translates into 88.5 million acres of corn and 87.5 acres of beans, both of which are significantly different from the USDA projections of 89 million corn acres and 83.5 million soybean acres, which was met with skepticism by the trade.

But spring weather could change farmers’ intentions. So could a spike—or drop—in the price of either crop as growers decide whether to keep less productive land in use or not. In regions where the crop options are more varied, some farmers are looking at grain sorghum, which has seen strong export demand.

“There are a lot of acres flying around,” said Hightower, who expects farmers to plant 87.8 million acres of corn this year. “ It’s going to be extremely acute in the corn market as to whether we build [stocks] or discharge stocks. That is going to increase volatility. It’s not only the size of the crop but what are we going to plant and how much are we going to get out of those particular plantings.”

University of Illinois professor emeritus Darrel Good has similar concerns when he looks at acreage, which can change dramatically from the intentions report to reality. “It’s an issue every year, but one that doesn’t get enough attention,” he says.

Over the past eight years, Good points out, the acreage total for the big eight commodity crops, plus prevented planting and conservation land, has swung by more than 9 million acres from the high to the low. “In statistics, 5 million acres is a sampling error, but 5 million acres is big economically,” he says.

That sort of swing could make a difference in this kind of market. Hightower points to 2014, when the USDA’s initial estimate of 79.5 million acres rose to an actual of 83.7  million acres, a jump of 4.2 million acres. “That kind of acreage change is a potential death knell for the price of soybeans,” he warns.

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