As the market has its sights set on two major USDA crop reports next week, price action was fairly uneventful this week. Despite this week’s lack of noise, the market may still be sending a message, especially with the new crop spreads
“What we’ve seen is the December/March corn spread is it’s leaking a little oil in here and working a little bit lower testing some support, while the new crop November/January soybean spread is staying pretty strong,” Darin Newsom of Darin Newsom Analysis said on U.S. Farm Report. “So, overall, what this is telling us is the commercial side may be getting a little bit more comfortable as we head towards planting season, possibly the idea that we could see maybe more corn acres than expected. Early on we were thinking that soybeans might be trying to buy some acres away. But the spreads are indicating corn may be holding on to most of its acres possibly increasing again, soybeans aren’t likely to get all they’re going to need to rebuild supplies.”
Market Surprises?
USDA reports have the chance of throwing out some surprises. So, what may some of those surprises be when UDSA releases its Prospective Plantings report next week? Dan Hueber of The Hueber Report says the first surprise may come in soybeans.
“One of the surprises would be if we don’t see the increase in beans as we would hope to,” says Hueber. “And USDA gave us 90 million acres on their baseline projections here a month ago. But, realistically, we need to see higher acreage than that.”
There was talk a rally in the cotton market may buy some acres, but with market erasing those gains lately, those acres could go to corn, soybeans or sorghum.
“The market is kind of geared up to see big numbers with that 92 million on corn,” says Hueber. “Hopefully we will be at the lower end of it. But I think people are tending to want to favor corn as far as planting in the spring. Probably the biggest question in the end, particularly when you look at the how tight the ending stocks projections on the soybean market are, is we’re going to need to see higher than 88 million to feel at all comfortable as we move into the summer months.”
Searching for Soybeans
So, what if USDA shows a soybean acre number less than 89 million acres? Newsom says it could be fundamentally bullish.
“That’s going to keep our market fundamentally bullish through the next marketing year, as well,” he says. “And certainly, it seems to be what the markets are telling us regardless of what’s out there. Right now, it’s bullish out through the 2021 to 2022 marketing, but, that’s certainly going to increase the fire underneath this already hot market.”
An Acreage Battle Across North America
The acreage debate is also a focus for Canadian producers who are waiting to see just how much U.S. acres switch this year.
“I deal mostly with Eastern Canada, certainly in Western Canada, canola is certainly a favorite now,” says Philip Shaw, an agricultural economist and farmer in Dresden Ontario Canada. “Canola is really hot. But keep in mind, in Ontario, the U.S. are our competitors, too, and we do import a lot of American corn from time to time. But our acres are more finite than your acres. Most Ontario farmers, most Canadian farmers are fixated on how many acres our American friends will grow this year.”
