With ag markets already responding to the effects of the worldwide COVID-19 pandemic, Tuesday’s release of the U.S. Department of Agriculture’s prospective planting report threw things into upheaval again.
The number of acres farmers are planning to devote to corn – 97 million across the U.S. – was higher than the trade estimate of 94.3 million. Soybeans, at 83.5 million were less that the trade guess.
“Those numbers kind of shocked everybody,” said Pat Kroese, risk management specialist with the Omaha-based ag technology company GrainBridge.
The large number of corn acres is attributed in part to the weather. Spring flooding in the Midwest isn’t expected to be nearly as bad as last year, so there should be fewer prevented planting acres.
“There’s more optimism this year,” Kroese said.
Wetter weather in the Mississippi delta region also had an impact, according to Kroese. The area has had some wet weather that kept farmers from being able to plant cotton, and they may switch those acres to corn.
South Dakota prospective plantings reflect the expectation that fewer fields will be flooded out this year. Farmers are expected to devote 6 million acres to corn, up 38% over last year. Soybean acres, at 5.4 million, make for a 54% increase over 2019 acres.
The nation will get a better picture of planted acreage when USDA releases its final planted acreage report June 30. Kroese said that will be another time to be watching the markets. Weekly planting progress reports will have an impact as well.
He encourages producers to have a plan in place for taking advantages of up markets and protecting assets.
“Take your bias from your own opinion and put together a strategy to protect yourself if you think markets are going lower,” he said, suggesting using pricing floors and put options.
Such a plan should start with having a firm understanding of your cost of production, he said. From there, farmers can figure out where to minimize costs – for example, taking one less pass in the field or cutting fertilizer purchases.
“That’s something they have control of,” Kroese said.
Planning ahead with the local elevator or your brokerage firm can be a benefit if things change when farmers are busy doing summer fieldwork, he added. Kroese suggests putting some step-up sell order in to take advantage of better prices.
“Let the market do its thing, and let your offers execute for you while you’re busy in the field this summer,” he said.
He’s seen a lot of farmers use hybrid contracts, pricing mechanisms that can give protection from the market. They also let the system automate some of the decisions, taking the emotional aspect out of it.
Kroese suggests that if studying the markets isn’t your thing, to find a financial advisor you can trust.
“They can help you,” he said, adding that hybrid contracts maybe one helpful solution. “Keep your eyes open to opportunities that your local co-op is providing.”
Other insights from the South Dakota prospective planting report:
Hay acreage is up 1% to 3.4 million acres.
Winter wheat acres seeded last fall are down 24% to 650,000, and spring wheat planting intentions are 850,000 acres, up 33% from last year.
Sunflower producers expect to plant 620,000 acres, up 16% from 2019. Oil varieties account for 570,000 acres, and non-oil varieties made up the balance at 50,000 acres.
Oat intentions are estimated at 345,000 acres, up 41% from last year.
Barley producers intend to plant 45,000 acres, up 22% from last year.
Sorghum growers intend to plant 270,000 acres, up 8% from a year ago.
Dry edible pea planting intentions are estimated at 11,000 acres down 31% from a year ago and lowest on record if realized.
Estimates in this report are based on a survey conducted during the first two weeks of March.
The grain stocks report for South Dakota showed that as of March 1, the state had 373 million bushels in storage, down 20% from 2019, according to the USDA's National Agricultural Statistics Service. Of the total, 225 million bushels are stored on farms, down 35% from a year ago. Off-farm stocks, at 148 million bushels, are up 25% from last year.
Soybeans stored in all positions totaled 102 million bushels, down 36% from last year. On-farm stocks of 43 million bushels are down 50% from a year ago, and off-farm stocks, at 58.7 million bushels, are down 18 percent from 2019.
All wheat stored in all positions totaled 56.1 million bushels, down 2% from a year ago. On-farm stocks of 22 million bushels are down 10% from 2019, but off-farm stocks of 34.1 million bushels are up 4 percent from last year.
Sorghum off-farm stocks totaled 3.67 million bushels, up 23% from March 2019.
Oats stored in all positions totaled 4.24 million bushels, up 33% from last year. On-farm stocks of 3 million bushels are up 30% from 2019. Off-farm stocks of 1.24 million bushels are up 40 percent from last year.
Barley on-farm stocks of 190,000 bushels are down 30% from a year ago.