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The Eyes Of March On USDA Planting Intentions Report

More soybeans, less corn acreage.

It’s March. That must mean that investors and the commodities traders will be awaiting this month’s USDA Prospective Planting Report.

On March 31, 2017, the USDA will either confirm or dispel the swirling talk about the U.S. farmers’ intention to plant 3 to 4 million more soybean acres than corn this spring.

Multiple factors point toward a move to higher soybean acres such as lower winter wheat seedings, lower cost of production for soybeans, and the soybean-to-corn price ratio.

Recently, the Congressional Budget Office (CBO) projections for baseline farm programs pegged 2017 corn planted acreage at 91.5 million acres. Plus, the USDA’s long-term baseline projections report including years through 2026 have the 2017 corn planted acreage at 90 million acres.  

Late last month, Doane, a private analyst firm, released its 2017 acreage estimate with corn plantings at 90.6 million vs. 94 million last year. The company’s soybean acres are pegged at 86.7 million vs. 83.4 million last year.

Yet, PIRA Energy Inc. has pegged the 2017 acreage split at 93 million for corn and 87 million for soybeans.

The conventional wisdom remains that farmers can make at least some profits by growing soybeans vs. corn. In fact, as late as mid-February, the CME Group’s November soybean futures prices rallied to over $10.30 per bushel. At that time, the soybean month-to-date average price for November soybeans reached $1.35 above the February average price in 2016.

Although the current market is offering a soybean-to-corn price ratio of 2.8-to-1, not all marketwatchers see this as the green light for farmers to plant more soybeans.

In a late February Successful Marketing enewsletter, Al Kluis of Kluis Commodities stated that it’s very possible the U.S. will see a boost in soybean acreage, especially if a wet spring is realized. But, Kluis told customers that he is not in the ‘more soybean’ camp.

“We have suggested that newsletter subscribers get at least 30% of their new-crop 2017 soybeans hedged ahead. If you are one of the farmers who is planning to plant a lot more soybeans, then I have a few suggestions. First, try and stay with a crop rotation that maximizes yield. Over a five- or 10-year time period, going with the rotation that maximizes yields usually maximizes farm income,” Kluis stated.  

“Second, the U.S. and global fundamentals are much more favorable for corn than soybeans. Planting less corn and more soybeans could be a huge financial mistake," he said. "Third, if I have not changed your mind yet, then make sure you reduce your risk by having an aggressive new-crop soybean marketing plan using hedges and puts.”

Pete Meyer, PIRA Energy, says his combined acreage estimate total of 180 million is well above the USDA’s estimates and will be above the Planting Intentions Survey, knowing that farmers keep those numbers close to their vests. “Fringe acres will see many more beans at the expense of wheat. The soybean-to-corn price ratio is very geographically based depending on cash. Some locations are still at 2.7:1 and even higher. Futures at 2.57:1 suggest a $70-per-acre advantage for beans, but, as I said, it all depends on cash in your area,” Meyer says. “Most favorable planting conditions would favor corn, no questions about it. The earlier these farmers get started, the higher the tendency to plant some more corn.”

DeAnna Hawthorne-Lahre, StatFutures cofounder and trader, says at this time last year the market was asking farmers to plant more soybeans, too. “Soybeans were a solid ask over corn for acres, and the farmer planted corn anyway,” she says. “This could be why the market is not pushing soybeans higher for more acres.”

Hawthorne adds, “This, of course, opens up Brazil’s farmers to take that demand, but that is just my view. The only reason more corn acreage would be better long term is a larger livestock herd.”

The next market discussion, if U.S. farmers plant 3 to 4 million less corn acres next month, will be the impact on price and supply, according to Todd Hubbs, Agricultural Economist at the University of Illinois.
“The 2017-2018 marketing year expectations for corn consumption exceed projected production, which leads to a lower level of ending stocks by the end of the marketing year. The size of the decline is important for determining price as we move through the next marketing year,” Hubbs stated in a University of Illinois weekly release.

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