Market analyst: Is the bullish USDA report believable?

Ray Grabanski Special to the Farm Forum
Farm Forum

USDA came out with a very bullish acreage report March 31, with a projected 2 million acres less of corn and 2.4 million acres less of soybeans than expected by private traders.

It was ironic, as USDA also hiked winter wheat planted acres 1.2 million acres — even though they forecast winter wheat acres in January (which was supposed to be a final number). Did farmers plant another million acres of winter wheat between Jan and March? Or could USDA make a mistake? And if so, which was the mistake — the January report or March report?

Or maybe, that says something about the accuracy of USDA reports. USDA does eventually get things right, but sometimes only after months of what I think are mistakes. Recall that USDA forecasted corn planted acreage last year at 97 million, and actual planted numbers were 90.8 million.

I think that’s a big mistake. Is it possible that USDA is off by 2 million or more this year?

By crop, the report had corn acreage unchanged from last year. Soybeans are up 5%, wheat is up 5%, sorghum is up 18% and cotton unchanged. Minor crops include sunflowers down 29%, dry beans down 11% and barley down 1%.

What the report does indicate more accurately than acres planted to each crop is probably the total acres planted to crops. In this report, it showed farmers are not as willing to increase total acres as much as everyone anticipated. So there is a total of about 3-4 million acres less intended to be planted than the trade expected. That is bullish.

Even more important than 3-4 million acres is yield; what will yields be in 2021? What will the trend be? If we are starting the return of the August-January drought, we could drop 10% of all yields in 2021 — that is more important than a 3-4 million acres swing in either direction. But, if we plant early and then it turns wet again, we could have 10% above trend yields. That wipes out even 20 million acres of lost plantings.

Point being, weather is now the big dog of the market. Not acres. Not demand. Weather dominates for the next five months. If planted right, weather in July and August will determine prices, period.

Weather forecasts are becoming more moderate compared to the warm/dry 14-day forecast of April 5; there is a little more precipitation added to the next 7 days — especially in the northern corn belt. Then, the 8-14 day forecast adds a bit more rainfall and pushes it more towards normal levels. The temperature forecast also cools a bit to just a bit above normal — not significantly above normal as it was yesterday. That should help to support grains, as it might not be as early a planting season as expected.

Planting of most crops in the crop progress report on April 5 (the first of the year) was basically just getting underway, with most crops at or slightly ahead of normal planting progress. That is surprising, considering how early the spring seems to have melted snow in northern areas — it looks like an early spring planting season from all indications. However, the numbers don’t show it (yet). The first planting dates for hard red spring wheat and corn were just getting started under crop insurance rules, so that might be holding some farmers back as agents are fielding a lot of questions about the first planting dates.

If planted before that time, you still can get coverage — but only once the crop is established as if you plant before the first planting date, you lose your replant coverage only. But most farmers think you have no coverage if you plant early — and that might be holding them back.

One thing is certain — new crop prices of corn and soybeans are basically at their 6 year highs right now as they try to attract more acres this spring. This is starting to look like a good sales opportunity for those who held back considerably, like we did on 2021 sales. Quite honestly, the market is starting to get a tired look to the bull market, and that’s usually when it’s a good time to make sales when you can lock in a decent profit (like we can now). As a market guru, when you see a pile of money laying in a corner, it’s a good idea to pick up some!