We've lost some beans in our pocket, but found some beans out front. Conversely, we've found some corn in our pockets, but lost some corn out front.
This was an apt description from a grain and oilseed analyst describing the old crop/new crop situation for soybeans and corn from USDA's March 31 Prospective Plantings report. For beans, the phrase means that last year's soybean crop might not have been as big as once thought, but soybean plantings are now expected higher than most in the trade were thinking.
Conversely, last year's corn demand is not as strong as expected, resulting in higher stocks. But corn acreage for 2005 is a little under trade expectations.
According to USDA surveys conducted during the first two weeks of March, U.S. farmers intend to plant 73.9 million acres of soybeans in 2005, down from last year's estimate of 75.2 million acres. For corn, intended plantings for this year are 81.4 million acres, up from last year's 80.9 million acres.
The trade was expecting somewhat different numbers for both crops, according to Jerry Gidel, president of Midland Research, speaking at a Chicago Board of Trade press briefing on the report. “Instead of soybean acreage going down about 1.7 million acres to 1.8 million acres as we thought, we only had a decline of 1.3 million acres.”
USDA also estimated current soybean stocks at 1.38 billion bushels, down about 40 million bushels from the average estimate. “At first glance this appears to come from (correcting) an over-estimate of last year's crop. So we've lost some beans in our pocket, but found some beans out front.”
Corn acreage for 2005 came under even the lowest trade guess, but current corn stocks surprised, too.
“We had stocks numbers for corn of 6.75 billion bushels, which is about 30 million bushels over expectations. This says that feed usage has not been as robust as people had hoped. So we've found some corn in our pockets, and lost some corn out front.”
As for USDA's lower acreage number for corn, “some of this is due to higher fertilizer costs, but we don't want to forget that between Feb. 15 and March 15, we had new crop beans move from $5.20 to $6.20. That changed some attitudes.”
Reduced soybean acres in the Mid-South are a direct result of soybean rust issues, according to Jack Scoville, vice president, Price Futures Group. But there is another factor. “We have to remember that there was a significant increase in soybean acres last year in the Mid-South. We were on a heck of a move if you recall up to $10, and farmers wanted to plant early and capture a premium. That doesn't exist this year, so economically, you're going to see some switching.”
Southern farmers might have decreased their soybean acres even more this coming year, according to Gidel, “but USDA and the Extension Service have put out a lot of good information about how to handle Asian soybean rust. I think that has calmed some of the fears of how to deal with the disease. We'll find out this year if that is the case.”
The buoyancy in the soybean market will continue as long as Brazilian soybean producers continue to hold their crops in anticipation of higher prices, and until there is a better idea of what is happening with soybean production in the United States, according to Scoville.
Gidel said if soybean rust spreads out of Florida into the Mid-South within the next two or three months, “that could change the whole planting scenario by the time we get to June.”
Meanwhile, the soybean market will continue its volatility, with $6 values holding on old crop, and $6.50 to $7 the highs on the new crop. We still have big carryover stocks longer-term, so we don't want to get fired up looking for outrageous prices this year.”
Scoville believes farmers should try and sell into corn market rallies, “because it doesn't appear that we are going to have a shortage of corn any time soon.”
Gidel sees new crop corn values as high as $2.50 “if we have issues about getting corn in the ground. The increased volatility we've seen in this market is going to stay with us.”