FORT COLLINS, (Colo.): Greatly improved profitability levels have lifted US farmers’ enthusiasm for the 2021 planting season, but market watchers’ anticipation of US government planting numbers due on Wednesday has reached a fever pitch, and the trade estimates in particular deserve some attention.
Chicago corn and soybean prices have remained relatively stagnant in recent weeks compared against the steep rally in the last few months of 2020. Wednesday’s survey-based acreage numbers from the US Department of Agriculture, along with quarterly grain stocks, are expected to provide clearer market direction.
On average, analysts peg US corn plantings at 93.2 million acres, which would be a five-year high and up 2.6% on the year. Soybean area is seen at 90 million acres, the second-largest on record and up 8.3% from 2020.
For soybeans, that would be equivalent to USDA’s February outlook estimate, though the corn guess is unusually high versus the February figure of 92 million. Normally, analysts’ pre-report corn acres are only fractionally different from the outlook area.
There are arguments why both corn and soybean acres each could be higher than the trade guesses, but capacity restrictions and poll history would suggest that only one or the other could land substantially above expectations.
Since at least 2005, analysts have never under-guessed both corn and soybean planting intentions. They have over-guessed both in only two of the years, 2010 and 2018. In the other 14, the directional misses were opposites, meaning if the trade was too high on corn, it was too low on beans, and vice versa.
USDA’s planting intentions report along with quarterly grain stocks will be published on Wednesday at noon EDT (1600 GMT). Analysts see March 1 corn, soy and wheat stocks at multi-year lows.
It is well accepted in the industry that more soybean acres usually result when new-crop Chicago soybean futures are relatively high versus new-crop corn. November soybeans have been about 2.6 times stronger than December corn for the last three months, historically favoring soybeans.
The only other comparable ratios in recent years were in 2017 and 2018, when soy acres set records. The ratio was also elevated versus prior years in 2014, and all three of these years were associated with big soy plantings.
The trend on trade estimates would seemingly indicate that the trade has made a rare underestimation of soybean acres ahead of Wednesday’s report. In the last 12 years, the trade underestimated March soybean intentions only twice (2014, 2017).
In both 2014 and 2017, soybean acres rose 8% on the year. But one difference between those years and this year is that 90 million acres have been seen before whereas the 2014 and 2017 areas were uncharted territory at the time, likely contributing to the trade’s lowball estimates.
The trade overestimated 2018’s huge soybean area even though the bean-corn ratio still unequivocally favoured soybeans at that time, and acres were still easily the second-highest in history. But current corn prices relative to the ones in 2017 and 2018 might make the argument for corn over beans in 2021, despite the high ratio.
December 2021 corn futures started to rally with the nearby contracts last August, and by November, they had distinguished themselves versus most prior years. By the end of the year, the 2021 contract was at least 15% higher than at the same point for the 2017 and 2018 ones, and that margin had been maintained through at least early March.
New-crop soybeans are also at multi-year highs for the time of year, but it is well known how much US farmers love to plant corn. Farmers in North Dakota, a major acreage swing state, have noted their intentions to plant a lot of corn if the weather cooperates, and part of that decision is more confidence in their ability to raise strong corn yields. Soybean prices certainly justify a big soy area if that is the destiny of Wednesday’s numbers, but the corn-supportive factors could cause the soybean area to violate the lower end of analyst guesses.