USDA is set to release its March Prospective Plantings report on Tuesday, March 31. Typically, acreage talk and banter dominates the market in March. However, this year, acreage discussions have been put on the backburner, due to COVID-19 and the crisis unfolding in ethanol.
As USDA prepares to give the industry a first look at farmers’ plans for planting, Arlan Suderman of INTL FCStone thinks the acreage report may not be a big market mover next week, either.
“I don't think it will, because I think these other stories are bigger,” he says. “Longer term, it will have an impact because longer-term, if we hit what the trade is expecting, and we get trend yields this year, we're going to have ample supplies if we don't beef up demand.
Suderman says the token to supporting prices the last half of the year is bigger demand, and he’s hopeful that can come from China.
“Overall, we're going to see some planting decisions be changed, but those will be relatively minor,” adds Suderman.
Joe Vaclavik of Standard Grain also thinks if there’s an acreage shift, it will be a small shift and will occur outside of the core of the Corn Belt. He says cotton prices have crumbled the past couple of weeks, and that could cause some cotton farmers to switch.
“Do you see some acreage switch in fringe areas because of that? I guess that's possible,” Vaclavik says. “In terms of your key corn and soybean growing areas – Iowa, Illinois – probably not. I don't think there's any real incentive to switch from corn to soybeans or the other way around.”
Vaclavik says neither corn nor soybeans prices are at profitable levels right now, therefore, there’s no big incentive to switch.
“I'm going to go with the idea that corn acreage is going to be pretty big, and it's going to be somewhere in that 93 to 95-million-acre range,” he says. “Soybeans, I've been somewhere in that 84 to 86-million-acre range.”
Vaclavik thinks larger corn acreage is already somewhat baked into prices, so that wouldn’t be a shock to the market next week. Instead, a possible surprise could come in grain stocks.
“The grain stocks can often be a surprise, and those numbers are always overlooked ahead of the reports,” Vaclavik explains. “Nobody really pays a whole lot attention to the grain stocks. But I feel like in in my career, at least, I've seen the grain stocks numbers -- in this particular report –surprise the trade maybe more often even than the acreage numbers. So, I think that that's something that you should pay attention to.”
Suderman agrees farmers in the Midwest will stick with growing more corn this year, despite the crumbling ethanol market.
“In the core of the Midwest people feel like they can yield their way out of a hole with corn better than soybeans,” Suderman says. “Outside of the Midwest, or the fringes of the Midwest, you start getting more of the acreage shifts.”
Suderman thinks that could come in the form of more grain sorghum getting planted in the Plains, or more soybeans planted in the South, versus maintaining cotton acres from last year.
“In the big picture, corn and soybeans still drive the acreage mix,” Suderman says. “Winter wheat is what it is, so then the question is spring wheat, and we probably have more spring wheat than what we otherwise would have.”
Suderman says INTL FCStone currently has corn acreage pegged at 93.685 million acres and soybean acres at 84.9 million acres. He says if those acreage estimates come true, we’ll face ample supplies and the need for more demand.