NASS threw the market a curve on March 31 with unexpected estimates of 91.1 million corn acres and 87.6 million soybean acres.
Total planted acres (nearly 179 million) to main row crops, left a deficit of 4 million to 6 million acres. Leaving land idle this year, given the economics, made no sense. But, the market will trade these numbers until June 30.
Once again, Brazilian crops have been underestimated. Their production has jumped from 130 million metric tons (MMT) to 134 MMT. NASS just raised it to 136 MMT, which is a 75-million-bushel increase.
In the U.S., our domestic carryover and current acreage estimates could cause an impossibly tight stocks situation. A weather problem could actually create zero ending stocks for 2021/22.
From a global perspective, the added 75 million bushels found in Brazil suggests they will be an export competitor into our harvesttime. If their production adds 138 MMT to the global supply, it would eliminate some, if not all, of the need for the U.S. to add acres.
WILL THE ACRES BE FOUND?
Will we find those missing 4 million to 6 million acres? Since March 31, the price relationship between corn and soybeans increased in favor of corn by about $36 per acre.
Assuming corn captures 2 million to 3 million acres and soybeans 1 million to 2 million, we have the potential of producing ample supplies of everything.
Brazil was looking at $10 soybeans at the start of their planting last fall. What if prices are $13 this fall? Given weather, Chinese appetite, global production and political concerns, soybeans in the teens could disappear quickly.
Our cost to produce crops might be local but the prices we receive are influenced by world supplies. Thinking out of the box with a global perspective could pay dividends this year.
Jerry Gulke farms in Illinois and has interests in North Dakota. He is president of Gulke Group, a market advisory firm. Disclaimer: There is substantial risk of loss in trading futures or options, and each investor and trader must consider whether this is a suitable investment. There is no guarantee the advice we give will result in profitable trades. Past performance is not indicative of future results.
