Will We Loose Over 4m Acres of Corn?
Mar 16, 2017
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While the start of March Madness can be a crazy time it has been a relatively quiet time for the Grain markets. However, there has been a lot of activity on the news front. In particular we saw two major acreage estimates for the upcoming growing season. They are derived in different ways, but the came to similar conclusions with both looking for slightly over 90 million acres of corn and just under 89 million acres of soybeans. But, are we really going to cut almost 4.15 million acres in corn?
We will certainly see more acreage estimates as we lead up to the March 31st Acreage Intentions report, but the two we saw this week were very similar in their expectations. Informa is looking for 90.77 million acres of corn and 88.66 million acres of soybeans. Allendale, in their survey based report, estimates 90.018 million acres of corn and 88.825 million acres of soybeans. This also falls in like with what the USDA was estimating in their Ag Outlook ForumBaseline Projections with 90 million acres of corn and 88 million acres of soybeans for 2017.
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Now, I am not going to argue that we will not see a reduction in corn acres and higher soybean acres, I just wonder if it will be as dramatic as the trade guesses are suggesting. Keep in mind that last year the USDA Outlook projected 90 million acres as did most of the trade. I was skeptical then and we put out a trade guess at the high end of the range at 91.2 million acres. Corn acres were 94.15 million in 2016. The trade was very surprised by this, but it really highlights the fact that theAmerican farmer likes to plant corn. As a side note most everyone was also underestimating the total number of acres last year.
There are many reasons why we would expect more soybean acres this year. The biggest one is that soybeans prices were trading about $1.30 higher in the all important month of February while corn was only about 10 cents higher year over year. Another reason, (that we also heard a lot last year) is that with low prices bankers would be pushing for the less expensive to plant soybeans. And, thirdly we could argue that with very good yields in the last few years we are getting more comfortable and confidant in consistent soybean yields. All of these factors will likely add up to more soybean and less corn acresthis year, but again I wonder if we are overshooting the mark a bit.
While corn prices were only about 10 cents higher year over year on average through February(crop insurance month) input costs have come down a bit as well. And while there is more incentive to plant soybeans this year I'm not sure it will come at a great expense for corn. American farmers like togrow corn andhave historically felt more comfortable with yield consistency.
Weather will have a lot to say about this too. If spring planting weather is good and corn is going in fast we could see corn acres increase a good amount, on the other hand if we have a difficult, sloppy, lateplanting season it is more likely soybeans do get the big bump in acreage. it will be interesting to see what the March 31st Planting Intentions report has to say and what the weather thinks about the deal.
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MayCorn Daily chart:
MaySoybeans Daily chart:
Producers looking to hedge all or a portion of their production may be rather interested in some of the options / options-futures strategies that I am currently using.
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Ted Seifried (312) 277-0113 or email@example.com
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