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Report to impact new vs. old crop
The March 30 USDA Planting Intentions Report will be out Friday. It could be a barnburner, combined with the Quarterly Stocks report out that same day.
Pro Ag is very concerned there will be more 'found' acreage due to the large amount of prevented planted acreage last year (over 10 million acres) and the added 2-3 million acres of CRP/new breaking ground expected to come into production in the US.
Given trader expectations, Pro Ag expects another 4 million acres to show up in various categories, including up to 1 million each in corn and soybeans, and perhaps 2 million more in HRS wheat acreage and other northern Plains crops (sunflowers, dry beans, canola, etc).
The extra acres in the Intentions Report will mean further trouble for new crop futures, as the record early planting season we are experiencing so far will also pressure new crop futures. In ND, it's expected to be the earliest planting season on record, with many other states expecting the same situation. This early planting season is NOT because of a developing drought across the US, as most areas have excellent soil moisture conditions to start the year.
In fact, the 2011 drought impacted HRW wheat growing region has been fairly well 'cured' of the droughty weather, as it's rained since last October in that region, healing up the dry soil conditions from last year. In fact, it's gotten so wet that TX is actually behind normal planting of corn, in spite of well above normal temperatures. HRW wheat crop conditions have improved tremendously from last fall, with the winter wheat crop now expected to have above average yield potential - quite a turnaround from last year's drought impacted crop.
With early planting of corn, small grains, HRS wheat crops and nearly every other crop in the US, it's likely we will have above average yield potential right out of the gate in 2012. That's good news for US producers, who have suffered from poor growing season weather the past two years. That resulted in well below average yields in major crops the past two years, and is exactly why we are starting at very good price levels for the 2012 crop year.
Unfortunately, if you have not yet sold those price levels, you have seen corn and wheat prices slowly trickling lower the past few months on new crop prices. Old crop prices spiked higher with the SAM crop problems (especially soybeans), but even they have a limit with how high they can go.
With soybeans already up nearly $3 from the mid-December lows, perhaps we've now finally done enough for old crop soybeans? It might be difficult for old crop soybeans to continue to rally with the new crop conditions looking so good to start the year. But as long as SAM crops continue to deteriorate in yield assessments, perhaps the old crop prices can continue to rise (other than report day, which might bring significant price pressure to all grains).
Look for an interesting day Friday, with the new crop production levels and acreages dominating the news, and also having the greatest influence on prices. But the tightness of old crop soybeans may be the linchpin that keeps grains from completely falling apart Friday. The early season of warming soils and getting planters going into ideal planting conditions will eventually dominate the new crop news, and it might not matter how much stocks we have on hand, if harvest will be a month earlier than normal. We may not run out of stocks if harvest is one month early this year - even if we tighten stocks considerably in the Friday report.
And early indications are that stocks may become more plentiful, especially in corn where ethanol use might be revised lower still due to improved efficiencies in ethanol plant production (gallons of ethanol per bushel of corn).
Make sure you've got everything hedged you need - Pro Ag recommends having the largest hedges in place you've had in your farming lifetime.
And even that may in the end not be enough!
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