Weather, basis move up corn acres

CHESTERFIELD, Mo. — Analysts missed the mark on the high and low ends of the pre-acreage report of corn and soybean estimates.

The U.S. Department of Agriculture acreage report indicated 94.1 million corn acres and 83.5 million soybean acres.

Analysts surveyed pre-report expected 91.81 million acres of corn and 87.66 million acres of soybeans, and the March prospective plantings indicated 92 million corn acres and 87.5 million soybean acres.

The unexpected acreage shift was a result of several factors, and Marty Ruikka, The ProExporter Network president, gave his take on the issue in a U.S. Soybean Export Council webinar on July 2 along with USSEC CEO Jim Sutter.

Starting with the total acreage in the report for the major row crops in the United States, what sticks out?

Ruikka: The major row crops add up to 255 million planted acres. I consider 255 million acres to mean that we are completely planted this year. We’ve had very good planting weather, and so we’re not going to have a very big prevented-plant number.

We had 5.3 million acres of prevented plant last and if you add that to the 251.3 million of all planted row crops last year, that puts you at about 256 million acres. We’re very close to 255 million this year, (all row crops planted with no prevented-plant acres).

Part of the surprise in the report was some people immediately ask if this is a prevented-plant issue. We do not think there’s a prevented-plant issue for this year.

When you look at the total of corn plus soybean, the maximum planted area for U.S. corn and soybeans is about 180 million acres. It’s really hard for us to get over that number ever. This year we’re at 177.6 million acres. So, that’s pretty close to our max.

One of the reason why that number is maybe not bigger is that wheat has had a really good year. Wheat is at nearly 50 million acres, up 4.2 million from the previous year. That kind of explains why corn and soy were not able to get back to 180 million acres.

Where did the changes in soybean acres occur?

Ruikka: Soybean acres were up by 200,000 acres in South Dakota and they went up in Minnesota 50,000 acres. That’s because of prevented plant last year, but in almost all other states they went down. So, something unique is going on with respect to soybean acres.

It was almost the exact opposite for corn acres. Corn acres are up in almost all of the Corn Belt states by a pretty big number, and you can the see the amount that soybean acres are down is slightly less than the amount that corn acres is up.

So, something else is going on and I think it’s in the wheat numbers. If you combine the increase in wheat acres plus the increase in corn acres, particularly in the Corn Belt states, you get very close to the amount of acres that soybeans are down.

Why do you think this shift occurred this year?

Ruikka: We had perfect planting weather for all Corn Belt states except for North Dakota and finally at the end of the primary planting season, the weather turned good in North Dakota and they were able to get their crop in.

When U.S. farmers have perfect planting weather, they will tend to plant more corn because the upside potential in corn yield is quite significant. The surprise above trend if everything is good can be maybe plus 30 bushels per acre.

We do sometimes get upside surprises in soybeans, but it would be more like an additional 5 bushels or so per acre.

When you look at the per acre dollar value of that, when things are really good for corn, we’re going to get a lot of corn acres. On the contrary, if there’s difficulty getting the corn crop planted, you’re going to see more soybean acres.

What impact could this shift to fewer soybean acres have on the supply and demand balance sheet?

Ruikka: Our soybean yield trend that USDA has is 52.7. The soybean trend yield is increasing about 0.8 bushels per acre per year. By losing 4 million acres of soybeans, we’re roughly losing 200 million bushels of production.

So, where’s that going to come out of? The uses of soybeans are for crush for domestic soybean crushers and for foreign export. Those are the two primary uses, so that’s where you have to think about adjusting.

Also we have our ending carryout stocks in the supply and demand balance sheet. If the carry-in is a big enough number, then we can draw down against that because that’s extra bushels we have. The carryout number last year was not very big, (230 million bushels for 2022-2023).

A carryout number projected (based on the acreage report) for 2023-2024 of 200 million bushels is pretty close to what we call the pipeline number.

That’s how much we have to have available in between new crop and old crop to just keep the whole U.S. transportation system operating. This adjustment down to 200 million bushels is a very low number.

It looks like exports will probably be down. We have not pushed down on crush. Crush margins are still very good and so we think that crush will still get its share of bushels.

The one other category is imports and when we saw the basis collapse and the Brazilian ports this year as Brazil harvested their soybeans and sort of overwhelmed their export infrastructure we actually got some Brazilian soybean imports to the East Coast of the U.S.

Maybe if these numbers hold for the 2023-2024 new crop maybe we’ll see an increase in imports into the eastern U.S.

Do you think there’s a good chance we see this swing back next year or even in the next USDA report?

Ruikka: I don’t think we’ll see any kind of a snapback in the next few reports. I think this number will hold for this crop. Can we snapback next year? Mother Nature always gives us a surprise.

Four years ago when we had 18 million acres of prevented plant, that has not occurred in modern times. That was a huge number and big surprise.

Having absolutely perfect planting weather this year is really kind of a surprise if you look at how much prevented plant we’ve had in the past.

I don’t think we’re going to get perfect planting weather again next year and we’ll have a more normal relationship between corn and soybean acres.

Also, as the crush increases in the U.S. we will be building our carry market for soybeans because the domestic crushers need to have prices, storage and incentives to farmers that hold soybeans to keep those for year-round crush.

Over the next few years, we’re adding a lot of crush capacity and that will make domestic prices firmer and basis better for U.S. soybeans.

You mentioned weather conditions at planting as a factor in shifting to more corn. Did input costs also have an impact on those decisions in the spring?

Ruikka: All input costs are up a lot in the U.S. When we do our gross revenue analysis as part of our 10-year projection in our Blue Sky Model every October, we get new data from the Census of Agriculture on input costs.

Last October, the input cost for the whole corn and soybean complex in the U.S. went up $10 billion. So, that’s a really big number. So, input costs are real.

Why when farmers get perfect planting weather do they prefer to plant more corn? We haven three markets for corn in the U.S. — export market, domestic crush market for ethanol and other things, and the livestock market. While for soybeans you only have two markets — exports and local crush.

When the seasonal market for whole soybean exports turns off and the only market is crush, these crushers are large entities. They consume all of the soybeans from maybe a 10-county area around each crusher, so they’re big influencers.

Even with an ethanol plant you only need a few counties for each ethanol plant, so farmers always have more choice in between different ethanol plants.

So, the basis in corn is more stable and more predictable than it is today with soybeans. How the basis behaves or how consistent the basis is another factor that makes farmers prefer to plant corn when they have the opportunity.