Rally likely encouraged more soy but acres to still fall short

Strong soybean prices won’t buy the acres in the United States that the market needs, says an analyst.

Prices shot up in response to the U.S. Department of Agriculture’s March 30 Prospective Plantings report that predicted 95.9 million acres of corn and 73.9 million acres of soybeans.

“It’s our opinion that we probably need anywhere from 76 to 77 million acres of beans to be planted, especially given what seems to be imploding South American expectations,” said Pete Meyer, an analyst with PIRA Energy Group.

“We’re just not going to get there, and the reason for that is because a lot of the U.S. farmers had already put down fertilizer in the fall with an eye towards planting corn and they’re not going to make that switch.”

He anticipates 750,000 to one million acres will move from corn to soybeans by the time the USDA releases its next acreage report at the end of June.

The soybean industry easily needs a shift of twice that magnitude to make up for Argentina’s shortfall and to meet overwhelming Chinese demand.

Argentina further slashed its soybean production estimate late last week to 42.9 million tonnes, which is well below the latest USDA estimate of 45 million tonnes.

“Quite honestly, I think that old crop (soy)beans are destined for at least $15 a bushel,” said Meyer.

Soybean prices are 2.5 times higher than corn prices, compared to 2.2 times higher earlier in the year. Any multiple below 2.3 favours corn seeding. Today’s values are slightly tilted toward seeding soybeans.

“The price probably merits a shift, but I think the price increase in the soybeans in comparison to corn maybe happened a little too late in the year for the southern producers, for sure,” said Steve Wellman, president of the American Soybean Association.

He agreed with Meyer that one million acres will likely shift because of the application of fall fertilizer and ideal spring seeding conditions.

“We have probably the fastest corn planting progress in history in most areas of the United States,” said Wellman.

Growers had planted 28 percent of the U.S. corn crop as of April 22, which is well above the 2007-11 average of 15 percent.

Meyer said the anticipated acreage shift into soybeans will likely have limited impact on either corn or soybean prices.

Corn will be more influenced by whether China buys as much of the 2011-12 U.S. corn crop as the market generally anticipates.

And by the time the June acreage report is released, all eyes will be on what South American farmers are intending to plant.

“They had a really bad year this year and they’re just going to plant as much as they can with beans,” he said.

A big South American crop would take the top off the soybean market, but it won’t show up until the May contract of 2013, so there is plenty of time for soybean prices to rally further to reflect the anticipated near-term shortfall.

Wellman said the growing season is starting out nicely for U.S. producers, who got a good jump on this year’s crop.

“If you follow the agronomists’ advice, early planting adds bushels,” he said.

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