TFM Perspective 04-08-2022


Was the Acreage Report Really a Surprise?

The March 31, 2022 Acreage report released by the USDA was termed by many to be a shocker for the corn and soybean markets, as the figures were quite different than the pre-report estimates. For others, the report really was not a surprise. There were several factors for farmers to consider, mainly the cost and availability of fertilizer for corn production as well as the potential expenses and income from other crops. Soybean prices were on the rise when farmers were being surveyed. For many, penciling in less corn and more soybeans made sense.

The report indicated corn acres at 89.5 million acres, down 4% from 2021. Soybeans acres were estimated at 91 million, up 4% from 2021. For wheat, all acreage hit 47.4 million, up 1% from 2021. Cotton saw the largest increase, with acres at 12.2 million, up 9% from 2021.

Corn is an expensive crop to grow. Most farmers consider themselves corn producers. They enjoy growing a crop that historically has been measurably consistent in yield year in and year out. This year, however, expenses and availability of fertilizers were apparently enough for a switch, most of which went from corn to soybeans. Yet, contract high prices for cotton, canola, milo, and spring wheat are competitors that are vying for acres, and have risen enough in price to be competitive. The cost of water may have been a determining factor, as well. Corn production is fuel-intensive. So, at survey time, the biggest gainer in acreage was soybeans. Those who held out last fall, betting that inputs would be cheaper by early spring, have been disappointed.  When farmers were surveyed on acre intentions, soybean futures were peaking, reflecting smaller world inventors, as drought-affected northern Argentina and southern Brazil. Crop estimates from Brazil started at 144 million metric tons, with private estimates now near 120 million. The most recent USDA estimate has pegged the crop at 127 million.

The question currently (as of this writing) is if farmers will switch back to corn. Since last week, soybean prices lost nearly one dollar, and corn rallied more than 50 cents. Only time will tell if they reconsider. The March report is an estimate, whereas the June 30 acreage report should have a more accurate view. It is likely the market will respect the March figures as it has with the initial reaction, yet not totally embrace them. This means the June report will be critical. Expect a lot of volatility until then. World supplies of commodities are tight. Reports that can swing millions of acres have a huge impact.

Be prepared with strategic planning as you head to the field. If the March 31 reports taught us anything, it is that surprises occur, and markets move. Keep a balanced approach with cash sales by rewarding rallies. Consider retaining ownership with call option strategies and using put strategies to establish price floors. Be sure to understand risks and rewards of any strategy before you enter into the positions.

If you have any questions on this Perspective, feel free to contact Bryan Doherty at Total Farm Marketing:  800-334-9779.

Futures trading is not for everyone. The risk of loss in trading is substantial. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Past performance is not necessarily indicative of future results.


Bryan Doherty

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