Producers Plan for the Upcoming Planting Season by Adding More Acres
It should come as no surprise that, weather willing, U.S. corn and soybean farmers will plant more acres in 2020. That’s because the disastrous wet weather of 2019 resulted in a record 12 million-plus acres of prevented plantings, and those are expected to be back in production this year.
U.S. farmers planted about 166 million acres of corn and soybeans in 2019. Last November, the U.S. Department of Agriculture suggested 2020 corn plantings would be around 94.5 million acres and soybeans at 84 million for a total 178.5 million acres. USDA’s first look comes March 31 in its Prospective Plantings Report.
Plant Corn or Sow Soybeans?
Decisions about whether to plant corn or soybeans vary by farmer and field. But as a general rule of thumb, the soybean-to-corn price ratio can provide some clues. A ratio below 2.3 favors corn and above 2.5 favors soybeans. Early in the calendar year, the market had seemed to be signaling for more soybean acres, but then began to trend toward more corn. Could it change again?
That's hard to anticipate, but there are some hints floating around. The University of Tennessee ag economists, for example, share that based on current corn and soybean futures prices, the corn-to-soybean price ratio is around 2.33. And as we mentioned, that indicates a greater bias towards increasing corn acres rather than soybeans.
Take a look at university crop budgets would also seem to evidence corn. Purdue University ag economists indicated a shift back to corn is likely with a season average corn price of $3.85 per bushel—the highest since 2013. And a soybean price of $9 per bushel would only need a $3.65-3.87 corn price to produce per-acre returns equivalent to a soybeans-after-corn rotation.
USDA forecast the 2019-20 marketing year average soybean price 37 cents higher compared to the previous year, which would be $8.85 per bushel. And that may not be enough to attract more soybean plantings. A big weather event in South America this month looks to be the only thing that might generate a sharp acreage-grabbing rally in soybean prices.
Spring Signs to Watch
The market will focus on other factors that could alter the outlook: weather and trade.
The Farmers Almanac predicts above-normal snowfall and precipitation are likely into early March, while April and May will be warmer and slightly drier than normal. The guide also predicts a warmer, wetter summer, with the heat coming in mid- and late June, mid-July and mid- and late August. Fall is predicted to bring above-normal temperatures and below-normal rainfall.
If a favorable weather pattern provides a big boost in acreage for both crops, we can expect the market to be overwhelmed with corn and soybeans at harvest and push prices lower into 2021.
The Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri shares in its outlook that a return to normal weather and higher corn and soybean production would yield a 2020-21 average corn price of $3.39 per bushel and $7.94 for soybeans.
Meanwhile, traders are wary of the impact the coronavirus could have on U.S. exports and commitments under the China-U.S. Phase 1 trade deal. Uncertainty has kept soybean prices muted. But, China needs meat, so any increase there is an indirect export of soybeans.
Bottomline—keep an eye on the Prospective Plantings report. It will serve as an early basis for 2020 supply projections and offer short-term direction for new-crop marketing sales.