USDA's March 31 Prospective Plantings report “caught everybody leaning in the wrong direction,” according to one analyst, and indicates farmers are responding more to rotation needs than the new farm bill.
According to the USDA report, U.S. corn producers intend to plant 79.02 million acres to the crop this season, slightly lower than last year's 79.05 million acres. The trade was expecting corn acreage of about 80.5 million acres.
“It appears that U.S. farmers really didn't respond much to the farm bill and the change in the loan rate, which was increased 10 cents to $1.98,” said Dan Basse, president of AgResource Co. “Farmers said basically that they intend to keep their rotations.”
Basse said that a 79 million-acre corn crop with trend yields would produce a crop of around 10 billion bushels, “which is right at usage.” Ending stocks would not rise significantly, “which means we're going to remain very sensitive to weather in the coming months.”
Another positive for corn is that feed use has been exceptionally strong and could help send ending stocks for old crop corn below a billion bushels. That would help support the weather market just now starting for corn.
The smaller corn planting means end-users are suddenly concerned about the eventual size of the corn crop, said Brian Bastings, a commodity research analyst. “We need to get to 9.8 billion or 10 billion bushels of corn with the tight carryout supplies we have.
“End-users need to start looking to get some protection in place.
“The farmer is in a position to be patient for a bit, but be ready to get some sales in if we see a nice healthy bounce from low price levels. If there's any delay during corn planting season, the cash market and the futures market could really get hot.”
Bastings said the market for corn could rally up to $2.50 in the short term. “That would be an excellent opportunity for a producer to lock in a floor. But you can still build a case for favorable weather and for very large yields and lower prices this fall,” Bastings added.
The situation is a little more bearish for soybeans, according to analysts. Soybean acreage, at an expected 73.2 million acres, would produce 2.88 billion bushels, “more than enough with what's going on in South America,” Bastings said.
On the other hand, stocks are tight and demand is strong.
“Obviously, the South American harvest is going to gain momentum in the next 30 to 45 days,” Bastings said. “But we believe that USDA's export number for beans is still understated and the ending stocks for old crop beans will decline. That will put the emphasis for beans, as for corn, on the weather for the next 60 to 90 days.
“We're going to need big crops in the United States and South America because of the growth in world protein demand we've seen the last couple of years,” Bastings said. “We need about 3 billion bushels of beans here in the United States to give this market some comfort.”
The emphasis for both corn and soybeans is now solidly fixed on weather, according to the experts.
“The first part of the weather puzzle is how fast this corn gets planted,” Bastings said. “It's very critical that the corn crop get in the ground between the middle of April and the middle of May.
“Longer-term on corn, the world is going to be watching the weather in China, given that the Chinese have been such a strong competitor in the export market.”
The analysts expect some interesting dynamics in old crop soybeans over the next six months. Bastings advises, “As a producer, you want to be very aggressive on any type of weather rally associated with beans to lock in good floors if you get an opportunity.”