Views on commodities and energy
U.S. Acreage Battle Commences
The buzz among traders on the floor of Chicago Board of Trade this week was the pending battle for U.S. acres — poised to be one of the messiest in history. It will be a price fight as global demand targets the country’s three top crops — corn, soybeans, wheat.
One flash point was USDA’s preliminary U.S. acreage estimates released during its annual outlook conference held this week, Feb 21-22, in Washington, DC. The other is the start of the planting season which is just six weeks away in the heart of the Corn Belt.
One prominent Midwest agronomist at Iowa State University, Palle Pedersen, said this week “it’s going to be an interesting spring.” Pedersen, who works with farmers from the top crop state of Iowa, said they are in quandary on how many corn and bean acres to plant. Lately, he’s been getting a sense that Iowans are looking more seriously at soybeans — as the price for new-crop CBOT November soybeans has rallied more than 20 percent since Jan. 1, hovering near $14 a bushel, and input costs to plant corn, like anhydrous ammonia, are skyrocketing.
This week USDA guesstimated that U.S. farmers will plant roughly 6.8 million more crop acres this year compared to 2007. Corn seedings could be the second largest in history since 1944 at 90 million acres vs. the 93.6 million planted in 2007. Soybean acres were forecast to jump to 71 million from 63.6 million last spring and all-wheat seedings were seen at 64 million, up from 60.4 million.
The big question is where are all the extra acres coming from? Many veteran traders are asking: “What is the government ‘smoking?’”
Sure, the USDA is saying some 2 million acres could come out of the Conservation Reserve Program. There will be fewer rice and cotton seedings and a big soft red winter wheat crop that will result in more double-crop soybeans (planted after the SRW harvest) in the southern Midwest. But analysts are still saying that’s not enough.
Whether the numbers are right has yet to be seen. But surely all three markets are positioning themselves to keep pace with one another in the volley for acreage this spring.
The first set of serious government numbers will come on March 31 when USDA releases its planting intentions report, based on actual farmer and industry surveys. Traders are saying to hold on to your hat until then.
Economist Bill Lapp, president of Advanced Economic Solutions, said it perfect last fall at an industry conference in Chicago: “The acreage battle in 2008 is going to make the acreage battle in 2007 seem like a child’s game.”