Big Acreage Shift Needed to Spark Corn, Soybean Market Rally
Uncertainty on trade issues and the subsequent price movements associated with speculation on the topic added a degree of difficulty to acreage decisions this year.
The March 29 Prospective Plantings report will provide the initial indication of potential acreage allotments for spring crops and sets the tone for production potential as we move into planting season.
Considerations of planted acreage this spring begin with analyzing the amount of acreage available for planting. During the 2016–2018 period, total acreage for principal crops tracked by the USDA came in at 319, 318.3, and 319.6 million acres, respectively.
When one considers the Conservation Reserve Program (CRP) and prevent-plant acres as well, acreage totaled 346.3, 344.3, and 345.0 million acres. Over the same period, corn, soybean, and wheat acreage combined came in at 227.6, 226.4, and 226.1 million acres, respectively.
Current USDA projections for the three crops indicates 224 million acres planted. The lower acreage estimate implies either a drop in principal crop acreage or an increase in acreage for other crops in 2019.
A potential reduction in planted acres will not materialize through an increase in CRP acres this year. Through January, CRP acreage enrollment is reported at 22.4 million acres, down from the 23.5 million acres last year.
The government shutdown and uncertainty in CRP acreage enrollment deadlines led to enrollments coming in below the 24 million acres set forth as the statutory limit.
Lower CRP acreage enrollment in 2019 may be negligible when considering acreage planted in major spring crops. While the impact of lower CRP acreage looks to be minimal, spring weather conditions appear set to have a significant influence on the acreage of spring-planted crops.
The weather forecast for parts of the Midwest indicates an above-average probability of wet conditions this spring across large parts of the Corn Belt. This may slow planting and impact acreage allotments.
The prospect of a wet spring looks to exacerbate issues in many areas. In particular, the western Corn Belt may see problems with more moisture on top of a significant snowpack.
Prevented planted acres totaled only 1.9 million acres in 2018, down from the previous three years. In those three years, prevented plantings were reported at 6.7 million in 2015, 3.4 million in 2016, and 2.6 million acres in 2017.
The National Weather Service forecasts a well-above-normal potential for flooding in the upper Mississippi River Basin and its tributaries. Flooding and wet conditions in these areas may lead to an increase in prevented plantings and would presumably reduce the total acreage planted. A return to average prevented plantings would diminish possible acreage availability.
Competition for corn and soybean acres this spring focuses on spring wheat and cotton acreage in some major production regions.
The winter wheat seedings report released by the USDA in February came in 4% lower than last year. At 31.3 million acres, winter wheat planted sits 1.24 million acres lower than a year ago.
The cold and wet conditions in the southern Plains that delayed fieldwork and planting last fall continued through the winter and led to slow growth in late-planted wheat. Some abandonment of late-planted wheat in the region remains a possibility.
USDA’s projection in February placed wheat acreage at 47 million acres. Based on winter wheat seedings, the implication is spring wheat and durum acreage look to be at 15.7 million acres. Spring wheat, corn, soybeans, and other crops will compete for acreage in the northern Plains states. At 13.2 million acres, planted spring wheat in 2018 rose from the 11 million acres planted in 2017.
Expectations of spring wheat acreage coming in at or above last year’s 13.2 million acres are in place. Durum wheat acres look to fall from the 2.5 million acres planted last year. Flooding and snow cover in many areas may impact spring wheat acreage and hold the potential for a shift into soybean acres if planting is delayed significantly.
Cotton looks to compete with soybean acreage in the mid-South region.
Currently, cotton acreage is projected by the USDA to increase by 1.1% to 14.25 million acres in 2019. The potential for higher cotton acreage exists as indicated by the National Cotton Council survey released in February pegging acreage at 14.45 million acres.
The survey showed that most of the growth is in the mid-South with the potential for reduced acreage in the Southeast. As a result, soybeans are expected to lose a portion of the acreage allotment in the mid-South with the prospect of increased corn acreage in the Southeast.
Corn acreage, in a range between 91.4 and 92.0 million acres, provides the baseline for many projections this year. The possibility of lower corn acreage remains a dominant consideration due to fieldwork issues, high fertilizer costs, and poor weather conditions.
Soybean acreage expectations indicate much lower acreage levels than last year’s 89.2 million acres with projections in a range between 84.3 and 85.6 million acres.
A substantial deviation in planted acreage from current expectations appears necessary to generate a substantial price reaction in corn or soybeans.
This article Spring Acreage In Focus. originally appeared on farmdoc daily.