Prior to the release of the Prospective Planting Report the industry estimated more corn acres and fewer soybean acres. The report, which USDA released on March 29, held true to those thoughts, but the surprise was by how much the released numbers differed from those earlier estimates.
“We were expecting higher corn acres and lower soybean acres and we got that, but the shift was much bigger than expected,” said Frayne Olson, grain marketing economist at North Dakota State University. “The cut in soybean acres and the increase in corn acres was much bigger than we had expected which, in general, was supportive for soybeans, but it really surprised the corn market.”
Prior to the report the average trade guess for soybeans was pegged at 86.2 million acres. However, USDA’s estimate called for 84.6 million acres. That’s a decline of 5 percent compared to last year’s acreage total of 89.2 million
“The direction was the right direction, it’s just that the degree was much bigger than we had expected,” he said. “That was kind of a shock to the market.”
Although the report was considered supportive to soybeans, soybean prices initially dropped lower immediately following USDA’s report though it wasn’t a major drop, Olson noted.
“Soybeans kind of fell in sympathy with corn,” he said. “The Prospective Plantings Report obviously was kind of positive. If we really don’t plant that many beans that would be supportive for both old and new crop soybeans.”
“The thing that put a little bit of a negative tone into the marketplace was the inventory numbers for soybeans were very close to what the market was expecting,” he continued.
Olson explained that it’s easier to follow soybean usage than it is for corn because of the feed component as it’s hard to track how much corn goes into the feed sector. On the other hand, exports of soybeans are very trackable because of registered sales, and crushing numbers that get crushed.
So it’s a little easier to track that and make sure we come close to the actual number.
On March 29, May soybeans opened at $8.88.68 and closed at $8.84.28, down about 5 cents.
November 2019 soybeans opened at $9.23 and closed at $9.19, down 4 cents.
At one local elevator in west central Minnesota regularly followed in this column, as of April 2 the April cash price for soybeans was $8.05 and basis was 95 cents under. December 2019 cash price was listed at $8.32 and basis was $1.10 under.
“It wasn’t devastating to the soybean market and, again, we’re slowly starting to rebuild on soybean prices. We’ve had a couple of up days since then,” Olson said.
“(The report) really kind of put a wrinkle into everybody’s plans, that the numbers came up with such a dramatic shift,” he added.
The numbers for corn pressured corn prices even more. Prior to the report the average trade estimate had corn acres at 91.3 million acres. USDA’s projection called for 92.8 million which was just slightly higher than the largest estimate of 92.7 million. That’s an increase of 4 percent or 3.66 million acres from last year’s 89.1 million acres.
As a result, corn prices fell off by about 17 cents. May corn prices on Friday, March 29 opened at $3.73 and it closed at $3.56. December 2019 corn also took a hit, opening at $3.98 and closed at $3.84.68, down almost 14 cents.
“The biggest surprise from the prospective planting report for me was the increase in corn acres in North Dakota,” Olson said. “That was much larger than we had expected. If the report is correct we would have record corn plantings in North Dakota. We’re up 900,000 acres from last year which is huge.”
Some of those acres would come from soybeans which saw a 400,000 acre cut in North Dakota. Some spring wheat acres are going to shift into corn and there was also some whittling away of some other crops as well so it’s not just a straight corn/soybean flip.
“My view right now today is I think 900,000 acres (of corn) is pretty aggressive,” he said. “I would be surprised if by the time we get into June and July and we get the final numbers for planting that we aren’t going to see that big of an increase.
“Basically the futures market for corn is saying, ‘Hey, we don’t need that much. If farmers in the U.S. are actually going to plant that much we’re going to take prices lower,’” he continued. “I do think the response by the futures market was ‘don’t overdo it.’”
The crush side demand for soybeans has been very good. The market is still seeing some very large crushing numbers, so both domestic use and exports of meal in particular have been good.
“Obviously the one number that everybody follows most closely is the export numbers for raw soybeans,” he said. “They’ve been kind of lackluster.”
That’s largely because of the ongoing trade dispute with China. Olson noted, however, that negotiations are ongoing and the U.S. is making some sales to China.
“It was announced the Chinese were making some more purchases this last week of about 800,000 tons which is positive,” he said. “So at this date they continue to come back in the market and buy some of our beans.
“At least we’re still making sales. The Chinese are still coming in and buying some which is putting some support into the soybean market,” he continued. “Without those purchases I think that soybeans would slowly start to drift lower. But to be realistic, we need to have those export sales continue throughout the summer.”
The U.S. is continuing to sell soybeans to other countries as well, so it’s not just the China issue, although that is very important.
“We’re holding up okay, but it’s nowhere near the level we saw last year. Again, that’s the concern, that’s what people are kind of nervous about...what kind of levels will China buy,” he concluded.