More chatter about new crop acres continues help the grain market trade sideways as we moved past the halfway point in March. It’s estimated that American producers are currently holding 55-60 per cent of their 2014/15 corn crop and about 20 per cent of their soybean crop (that’s a lot of bushels of corn left to sell while any shortfall in soybean supply will likely be substituted by South American supplies). Ultimately, analysts are all focused on acreage estimates and weather forecasts for the northern hemisphere. While parts of the U.S. Midwest are expected to get rained on this week, dry conditions are continuing to be seen throughout the rest of March in major winter wheat regions from Kansas down to Texas (remember though, wheat is a weed!).
Two legitimate farmer-based pre-seeding surveys came out recently for U.S. acreage numbers from Allendale Inc. and Farm Futures. Allendale expects corn acres are seen falling to their lowest level in five years at 88.5 million acres while Farm Futures is forecasting 88.34 million acres. This is well down from last year’s 90.6 million acres planted and the U.S.D.A.’s estimate of 89 million acres last month at their Outlook Forum. Purdue University estimates that it’ll cost about $446 US/acre to grow corn this year (on average soil), compared to just $228 US/acre for soybeans. Accordingly, Allendale expects U.S. soybean acreage at 86.05 million while Farm Futures says that it’ll actually be 87.25 million acres. Both estimates are a significant hike from 2014’s 83.7 million acres and he U.S.D.A.’s Outlook estimate of 83.5 million. In all likelihood, the number will likely be around have 85 million handle in front of it.
As for wheat, Farm Futures says that 55.6 million acres of the cereal will get planted this year in the U.S, in line with U.S.D.A. expectations but fairly below Allendale’s estimate of 56.68 million acres. Allendale expectations are based of winter wheat acres falling by 1.95 million acres year-over-year (-4.6 per cent) to 40.45 million but some of that loss made up by spring wheat acreage at 14.5 million acres (up 3.7 per cent or 1.48 million acres year-over-year, most likely attributed to the drier spring). Of more significance for some Canadian producers is that Allendale forecasts U.S. durum acres to grow by 325,000 (or +23 per cent year-over-year) to 1.72 million. With acreage in Western Canada also rising by about 20 per cent from 2014, total American-Canadian durum acreage in 2015 could be up by about 10 per cent year-over-year.
Overall, the next month or so will likely bring some volatility to the markets as the trade tries to sort through all the noise of new acreage estimates coming out. Locking in on some of the good basis levels we’re seeing right now isn’t a bad idea from my perspective. Also, look at locking in new crop acres with an Act of God clause seems to be a good bet (such deals available on FarmLead.com). Although other random opportunities are going to become available, keeping emotions in check and the long-term goal in mind is the proper course of action.
Brennan Turner is originally from Foam Lake, SK, where his family started farming the land in the 1920s. After completing his degree in economics from Yale University and then playing some pro hockey, Mr. Turner spent some time working in finance before starting FarmLead.com, a risk-free, transparent online and now mobile grain marketplace (app available for iOS and Android). His weekly column is a summary of his free, daily market note, the FarmLead Breakfast Brief. He can be reached via email (email@example.com) or phone (1-855-332-7653).