If you were hoping Thursday’s USDA numbers would offer a clear signal to plant either corn or beans, you weren’t alone. But between the changeable spring weather and sideways trading patterns in the market, there are still many unknowns for producers and the trade alike.
“The question is going to be, are farmers going to look at $4 corn on the board, subtract their basis and say, ‘Well, I’m not going to plant corn, I’m going to plant beans,’” asked Chris Robinson of Top Third Ag Marketing in a post-report CME webinar. “Because with beans with on the board at $9.50, most guys can still make money. But sub-$4 corn for some producers—it’s a no-win.”
At the same time, soybeans are surrounded by downside price risk.
In South America, Brazil and Argentina again are expected to produce big harvests—94.5 million metric tons for Brazil and 57 million metric tons for Argentina. “There is going to be some big offers of soybeans coming out of South America as we go through the harvest season down there, and I expect them to pound on the market, especially when you have moves in the dollar like we had [Thursday],” said Jack Scoville of The PRICE Futures Group, who also participated in the online discussion.
Closer to home, a rainy spring may cause Delta farmers revise their planting expectations. “Their stop date to switch from corn to beans is probably tax day—April 15,” said Robinson. “If they can’t plant corn, they’re going to plant more beans. That’s another bearish weight, potentially, on soybeans in a market that’s full of bearish news.”
As a result, many farmers appear to be taking a second look at corn, despite its higher cost of production.
"I was surprised by how much corn some of my producers were thinking about planting,” Scoville said. “They’re trying to play the contrarian card. They thought there would be so many soybeans getting planted that they could plant corn and maybe see the price of corn go up… Maybe it will work out for them if this rain keeps up.”
It could also backfire. “A lot of guys are planting corn anyway,” agreed Robinson, who referenced a University of Illinois farmdoc Daily piece which suggested that farmers might plant approximately 90 million acres of corn this year. “They said that if farmers have their way, they generally want to plant corn. So, at the end of the day, even if they’re thinking about switching to beans, the corn’s going to get planted.”
That possibility concerns him. “Hopefully they don’t run into a situation where they create such a huge supply that they hurt themselves,” Robinson said.
Regardless of what a farmer chooses to plant this spring, both Robinson and Scoville emphasized the importance of having realistic price expectations and being ready to respond to market moves.
“If you’re a producer, this is the type of market where you ‘SOS’-- sell on strength,” Robinson explained. “Don’t be afraid to get some sales done, because this could be a bad year to sit and do nothing and just hope for higher prices.”
Scoville agreed. “Don’t look for the top dollar this year,” he said.
That will require a shift in mindset for many producers. In 2008 and 2009, “your best marketing plan was to grow it and store it and wait. Last year that was the first year in a long time that it caught up to [producers],” Robinson said. “They waited for the rally, and the rally never came … Make sure you’ve got a plan to deal with the possibility of low prices.”