U.S. Midwest Spring Planting Approaches

March 9, 2009

nillinois-field-spring-2009Northern Illinois saw the warmest days of the year last week after a long, cold winter. High temperatures climbed into the 60s Fahrenheit by Friday. Heavy rains into Sunday also helped melt remaining snow in the fields, add to summer soil moisture reserves and help remind the grain markets that corn planting in the heart of the Midwest will begin in less than a month.
    
The U.S. Agriculture Department is already surveying farmers on their planting intentions. Results will be issued in the government’s prospective plantings report on March 31, the annual benchmark for the markets to gauge supply. Traders generally use the March numbers against an average 5-year annual yield to pencil in expected U.S. grain output until the USDA’s August crop report, the next farmer surveys, gives more insight into actual yields and acreage after corn pollination has taken place in the Midwest.
    
So grain trade speculation in March, and CBOT prices, will gyrate with changing views among traders as to what plantings will be for the 160 or so million acres of U.S. land usually planted to corn and soybeans. Illinois and Iowa together count for about one-third of each crop.
    
At the moment, traders and analysts say that high-priced fertilizer combined with national crop insurance rates recently set at $8.80 a bushel for soybeans and $4.04 for corn will likely mean fewer corn acres and more soybeans than a year ago. The insurance targets are used as the base price to determine crop loss payouts, if necessary. As a reference point, CBOT November soybeans closed at $8.15 on Friday and December corn at $3.90-3/4.
    
“The producer has a safety net but it favors beans versus corn, bottom line,” said Don Roose, analyst and president of brokerage U.S. Commodities in West Des Moines, Iowa. 
    
Roose expects soybean acres to be up from the 75.7 million seeded last spring and less corn acreage than the 86 million planted in 2008, especially if the price of fertilizer — key to producing big corn yields  — does not come down soon.
    
“That’s the huge debate out here in the country right now,” he said, referring to the cost of fertilizers like DAP.  “The retail price is still around $850 to $900 a ton even though the wholesale price is $350 to $400.”
    
Retailers got stuck with exorbitantly high priced fertilizer last year, buying it last summer at its highs on supply fears. But farmers are not willing to pay $850 for corn fertilizer today. 
    
Movements in CBOT corn and soybean markets over the coming weeks will also help farmers finalize their planting decisions. The price ratio between new-crop November soybeans to December corn widened by mid-January to 2.36:1 — a level that made soybeans very attractive to plant –  as traders saw soy prices surge on worries that Argentina’s soy crop output would be cut due to drought.
    
The ratio has come back since then with Argentine rains and was down to 2.09:1 as of Friday’s close, a level which tends to favor corn over soybeans. The general rule of thumb is  that a ratio of 2.2 to 1 is the “indifference” point where plantings could go either way, says senior oilseed analyst Anne Frick with Prudential Bache Commodities in New York.
    
Regardless of the current CBOT price ratio, she too expects more soybean acres this year than 2008.
    
Private analysts will begin releasing their 2009 U.S. corn and soybean acreage forecasts this week.

Photo: Northern Illinois field taken by Christine Stebbins.

Comments

If you had tried to take that pix from the edge of the field rather than the road—you would be in mud up to your knee. With frost out of ground and all the rain we had over the weekend, it is really wet for all of Illinois farm ground

Posted by Roy Huckabay | Report as abusive
 

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