Market analyst: U.S. Department of Agriculture reports and spring planting
It’s finally spring!
The temperature is rising, the snow is diminishing, and it’s time to get back to planting and growing a crop. With spring also comes the annual USDA acreage and stocks reports, with intended acerage the most important factor as we look ahead to the new year. This is the time when the focus moves from South American production to the U.S. and northern hemisphere.
With the U.S. as the world’s largest exporter of all crops, it becomes an important factor for the market. It looks like the U.S. will have an early planting year, as weather is warming and drying up which will allow the corn belt to get going on planting early this year. We could have most of the corn planted in April.
Weather is calling for below normal precipitation and above normal temperatures over most of the U.S. for the next two weeks. Specifically, it will be driest in the northwest 75% of the corn belt, with more normal precipitation in the southeast 25% the next seven days. The 8-14 day forecast has below normal precipitation in the northwest half of the corn belt and normal precipitation in the southeast half. Temperatures will be mostly above normal the entire 14-day forecast period in the corn belt — with only the southeast seeing some normal temperatures in the next 7 days as the heat moves in from west to east.
South America is seeing mostly below normal precipitation in the southern 75%, but normal in the northern 25% (the Amazon area). Temperatures will be mostly below normal in Brazil and above normal in Argentina — not good weather for the late, second crop corn.
With wheat prices sagging recently, Pro Ag will bet that the U.S. Department of Agriculture will miss some of the shifting from spring wheat to corn and soybeans. With early planting likely in the coming few weeks of warm/dry weather, corn acreage might be higher than USDA guesses this time.
Private estimates are showing higher corn and soybean acreage than the February USDA estimates, as well. It’s likely that acreage will be above the February USDA numbers as prices have remained high another 1.5 months since that report.
Bottom line is planting is likely to be early given the forecast, and early planting means higher corn, soybean and spring wheat yields. Also, it could mean more acreage planted and possibly more corn and less soybeans with early seeding. Also, the weather improved tremendously since mid-January in both the U.S. and South America, so the supply outlook has improved, which is why prices are now drifting lower. I expect more of the same — unless a drought kicks in after planting. If 2-5% more is planted, but yields are 5-10% less — supplies are still down.
The one constant so far, is that demand remains strong.