How fast businesses can change and how quickly the ethanol industry has changed farming in the South! On March 30, USDA released its planting intentions report and surprised many with an estimate of 90.5 million acres of corn.
Keep in mind that those are intentions only and the likelihood of such a large planted acreage occurring now are slim.
Why will not all of these acres materialize? Keep in mind, that when this intention report was released there was not a kernel of corn planted in the Midwest.
Everyone had planned on increasing corn acres under the “anticipation” of selling corn at $4 per bushel or higher. $4 in the cash market has not materialized for almost any farmers in the Midwest.
Now the market is substantially below that. Consequently, if a Midwestern farmer has not already applied his nitrogen (and nitrogen prices have nearly doubled since the first of the year), it will be easy to switch back to soybeans.
As you can see in the accompanying tables, we are now forecasting 89.5 million acres of corn and 68 million acres of soybeans.
What did occur of interest, however, was (as all of you know) the huge shift in acreage in Southern states.
For example, Mississippi increased from 340,000 acres of corn last year to 900,000 acres this year. Louisiana from 300,000 to 700,000. Arkansas from 190,000 to 560,000.
These are massive increases that will result in a wide basis and some significant problems this harvest in the South.
There will not be enough storage.
There will be a shortage of barges.
There will be a shortage of trucks and probably a shortage of combines.
This big of a fundamental change in only one year will cause significant infrastructure issues.
One thing is for sure — price volatility is going to be enormous. With a late planting and excessive water in the Midwest combined with near drought conditions in the South, corn and soybean prices will experience a weather market over the next several weeks or even months.
It is likely, however, that if weather problems push this market higher between now and the end of May, the highest prices of the year will be within that timeframe. Markets peak on bullish news — and this one will be no different.
Also, because of the logistics issues in the South, expect a wide basis at harvest time and long truck lines. It will be an interesting year.