(Reuters) – U.S. farmers may plant fewer corn acres and more soybean acres in 2019 than market participants originally expected due to the recent excessively wet weather and disappointing profitability of corn relative to soybeans.
This is an interesting scenario given that speculators have recently established a record short position in Chicago-traded corn, and primary soybean buyer China maintains trade tariffs on the U.S. oilseed.
I posted a Twitter poll on Tuesday asking readers to vote on their best guesses for 2019 U.S. corn and soybean plantings, offering four different ranges on each. Polling closed on Wednesday morning with around 600 votes for soybeans and 500 for corn.
The winning ranges were 90 million to 91.49 million corn acres and 86 million to 87.5 million soybean acres, with 38 percent and 35 percent of the vote, respectively.
These results are similar to the Reuters poll of 17 analysts conducted four weeks ago that produced averages of 91.5 million acres of corn and 86.1 million for soybeans.
But the makeup is a little different. In this week’s Twitter poll, ranges of below 90 million, 91.5 million to 93 million, and more than 93 million were also offered in addition to the winning category.
The Reuters poll would have had 91.5 million to 93 million narrowly edging out the category just below, which won on Twitter. But on Twitter, only 30 percent voted for the higher category.
Additionally, only one of 17 analysts from the Reuters poll saw corn acres dipping below 90 million, but 21 percent of the Twitter voters supported that scenario.
A similar trend was found in soybeans. Aside from the winning category, the Twitter poll offered choices of fewer than 84.5 million, 84.5 million to 85.99 million, and more than 87.5 million.
In the Feb. 20 Reuters poll, analysts would have been split evenly between the middle two Twitter choices. One analyst was over 87.5 million, and none had fewer than 84.5 million.
In this week’s Twitter survey, the 87.5 million-plus category came in second with 27 percent of the vote. Another 26 percent of participants selected 84.5 million to 85.99 million.
CONVERGING ACRES
The results of the Twitter poll suggest that 59 percent of the respondents see corn plantings below 91.5 million acres, and 62 percent see soybean acres exceeding 86 million.
This also implies that ideas of soybean plantings have risen from a month ago, but those of corn have fallen.
The 86 million-plus acre target for soybeans is also drastically higher than many market participants might have expected mid-last year.
Shortly after China imposed tariffs on U.S. soybeans in early July, I asked Twitter users for their ideas of 2019 soy acreage given that China was on the sidelines of the U.S. soybean market and domestic stockpiles were quickly expanding. I framed it as a “just for fun” poll because there were so many factors that were likely to influence reality in the months ahead.
Of the nearly 400 voters, some 30 percent selected the most conservative category, below 83 million acres. Another 29 percent chose 83 million to 85.99 million, while 27 percent thought 86 million to 88.99 million was more probable. The 89 million-plus selection came in last with 14 percent popularity.
The U.S. Department of Agriculture will publish its annual Prospective Plantings report laying out initial targets for U.S. corn and soy acres on March 29.
MARKET SUPPORT
Late last year, many analysts thought corn acres would expand by several million acres in 2019, especially as it was assumed that soybean profitability would fall because of the troubles with China. But this is no longer the case.
Higher input costs for corn have driven up the cost of production in many primary growing states, souring some farmers on the yellow grain. By comparison, soybeans may often be the more cost-effective choice.
On the Chicago Board of Trade, new-crop soybean futures have remained sufficiently elevated relative to new-crop corn futures near a ratio of 2.4 to one. That ratio does not distinctly favor either crop and certainly not an aggressive expansion in corn acres.
The weather has recently become a huge roadblock standing between many farmers and planting corn, which is often planted before soybeans and has a shorter, more sensitive planting window. Torrential rains and snow melt have caused flood damage estimated at $1 billion in Nebraska, Iowa, and Missouri, which may prevent the start of planting there for at least several weeks, if not longer.
Although less severe, many states in the Eastern Corn Belt are also waterlogged. U.S. government forecasts show that a wetter-than-normal pattern is likely to continue through the end of the month across nearly the whole nation.
Wet U.S. spring seasons, when persistent, can often reduce corn plantings and increase soybean plantings, since the oilseed can generally be planted later with fewer risks than corn for unfavorable hot and dry spells later in the year.
SAD IRONY
When the U.S. government initiated payments to farmers last year to compensate them for losses caused by the trade war with China, Agriculture Secretary Sonny Perdue stressed that the payments would be only for the 2018 harvest, since farmers would be able to read market signals to make planting decisions for 2019.
That notion might be a little insulting today for U.S. farmers, who are just weeks away from beginning the planting efforts for 2019. Whatever signals the market can send are clouded by the lack of a trade resolution between the United States and China, which accounted for half of U.S. soybean exports last year.
Market participants truly have no clue as to China’s intentions for the 2019-20 U.S. soybean campaign, leaving room for optimistic speculation in the event of a trade deal. That scenario-mapping has kept soybean prices elevated, at least relative to corn.
Even with a trade agreement, it is difficult to gauge China’s near-term demand for raw soybeans since the country is battling a widespread outbreak of African swine fever in its hog herds. If the disease is as serious as many market-watchers believe, China’s long-term trend in demand might not be as aggressive as in recent years.
