Two weeks after St. Patrick’s Day, the grain markets turned green.
On March 31, the USDA released its Prospective Plantings report, and most grain contracts shot higher, seeing gains as high as 25 cents in corn and 70 cents in soybeans. The report was quite a shift from expectations.
Corn acres were reported at 91.1 million acres, well below the expected numbers of most traders, while soybean acres were estimated at 87 million acres compared to the estimates that placed the crop in the 90 million acre range.
“(Corn) came in about 2.3% below the average trade estimate, and really below everyone’s estimate,” said James Mintert, an agriculture economist with Purdue University. “That was the shocker and gave us a positive response in the futures market.”
In total, the principal crops acreage estimate of 316.2 million acres was lower than anticipated, by 5 million acres in some cases, Mintert said. While the total acreage is higher than 2020 by 4 million acres, many traders expected the winter rally in prices to encourage even more planted acres.
“The surprise in the report really amounts to the fact that we didn’t pull as many acres in both corn and soybeans,” Mintert said.
Oliver Sloup, an analyst with Blue Line Futures, said these lower acre numbers are only going to help the market prices moving forward as weather starts to grab the eyes of most traders.
“With a lot less acres than we expected, there’s a catalyst to feed the bull a little bit,” he said. “Weather will be important, especially with corn, but it will be monitored very closely.”
Sloup described the initial market action after the USDA report as “fireworks” as the market moved into some unknown areas for price action.
“Now that we are in uncharted territory, this is all about momentum,” Sloup said. “This could continue and push us to the psychologically significant $6 handle (in corn). The momentum is rolling pretty heavily in the bulls’ favor as we head into spring planting.”
With less acreage than expected, the anticipated increase in corn ending stocks may not come to fruition either, Mintert said. While adjustments are inevitable, he said production will have to be strong to match some of the expectations set by analysts.
“Even with a rebound in acreage and trend line yields, it looks like we could be pulling down those ending stocks numbers,” Mintert said. “If you look at that as a percentage of total usage, that could put corn ending stocks coming out of the 2021 marketing year at 9% usage, compared to the 2020 marketing year of 10%. Those are the tightest ending stocks we’ve seen since the 2013 marketing year.”
For the soybean crop, Purdue University analyst Nathanael Thompson said after the major jump in prices, the expected fall basis price is around $12.26, which should be “very reasonable income levels.” However, he reminded farmers that this comes after a 70-cent jump which shows room for volatility.
“These are profitable levels and there’s upside on the soybean side of things,” Thompson said. “We aren’t suggesting everyone go all-in on selling new crop, but locking in a portion of the new crop at these levels is something to think about.”
After the report’s excitement, Purdue University analyst Michael Langemeier said to expect some changes to any numbers or estimates that have come out. Many factors, particularly weather and prices, could drive more acres.
“Some of the price gains we had today, we had earlier in March,” he said. “With increased fertilizer costs, we are looking at an advantage to soybeans of $50-75 per acre in Indiana. Maybe that’s enough to get some more soybean acres.”