American corn and soybean crops are in a statistical tie for acreage this year, a situation never seen before.
And so the opportunity for any rally in oilseed prices, including canola, is limited.
The United States Department of Agriculture planting intentions report last week showed that American farmers intend to seed 89.48 million acres to soybeans, up seven percent from last year and only about 500,000 acres less than corn, the traditional king of American crops.
In the mid-1990s soybean acres were in the low 60 millions. Through most of the 2000-13 period, soybean area had climbed into the mid-70 million acre area, but this year the oilseed has vaulted higher as its price and expected return per acre consistently outperformed corn through the winter.
The expected large corn carry-out weighs down the cereal. And although soybean prices played defense through the winter as forecasts for South American production rose, they appeared to hold a better promise for a small profit than corn.
While soybean planting is expected to be up seven percent, that does not guarantee a much bigger crop.
Yields last year were exceptional, averaging 52.1 bushels an acre, up from 48 bu. an acre, an 8.5 percent increase over the year before.
The USDA’s long-term trend yield forecast for 2017, assuming average weather, is 48 bu. per acre.
If yield fell back to the trend line, then that would cancel out the increased acres, resulting in a crop similar to or slightly smaller than 2016’s 4.3 billion bu.
However, for the past three years actual yields have significantly exceeded the USDA’s trend line, thanks to improving genetics and generally good weather.
Another question is whether the price developments since the USDA survey was completed could significantly alter farmers’ plans.
In four of the last five years, American farmers wound up seeding more soybeans than they expected to in the March report.
But we might not see that trend continue this year. Farmers tend to favour soybeans when the new crop price is 2.5 times stronger than corn. At the beginning of March the ratio in favour of November soybeans was 2.57 but with the adjustments since the report came out, the ratio is now 2.42 so it is back in corn’s favour.
Farmers told the USDA they would seed almost 90 million acres to corn, down four percent from last year. That was about a million acres less than what the trade expected and so that provided modest support to corn futures.
The spring wheat and durum seeding intentions were also slightly smaller than expectations but that did nothing to revive wheat’s fortune, as the price on April 3 was the lowest in 2017.
Rain last week in the U.S. Plains improved growing conditions for winter wheat.
I would not be surprised if farmers wind up seeding less spring wheat than what is in the USDA report. Speculation about planting will fill newsletters for the rest of the spring.
Weather will also affect what gets put into the ground. The longer- term forecasts for April indicate it might be wetter than normal in the U.S. Midwest. If true, and seeding is delayed, then that would favour shorter season soybeans, but if seeding progresses at a normal pace, that would favour corn.
Here in Canada, Statistics Canada has just completed its farmer surveys for the seeding intentions report that will be released April 21.