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COLUMN-Will U.S. corn intentions hit the market for a fourth straight year? -Braun


Band Karen Brown

FORT COLLINS, Colo., March 30 (Reuters)Market players have spent several months discussing 2022 acreage opportunities in the United States, but all of the early anticipation and analysis hasn’t added much value recently, especially when it comes to corn planting intentions. .

Insurance coverage for US farmers this year is at an all-time high for soybeans and very close to the record high for corn. But the high cost of inputs and uncertain availability, especially of fertilizers, have some analysts doubting that a large maize acreage is possible.

The first estimate based on a U.S. government survey for the 2022 spring plantings will be released Thursday at noon EDT (1600 GMT). The Statistics Department of the Department of Agriculture will also release quarterly grain stocks, which, like acres, can also be unpredictable.

The final trading days of March and June, the latter also featuring acreage and inventory data, produce two of the most volatile days of the year for Chicago futures.

On March 31, 2021, CBOT corn and soybean futures exceeded daily trading limits after industry estimates overstated combined corn and soybean plantings in the United States by 4.5 million acres. This misfire was among the worst in decades.

Corn intentions in March have been outside the range of trade estimates in each of the past three years, although this has not happened for soybeans since 2018 due to a wider range of estimates. of soybeans compared to corn in recent years.

Analysts put U.S. corn plantings in 2022 at 92 million acres with a range of 89.7 million to 93.5 million. That compares to 93.4 million a year ago and is identical to the USDA’s preliminary estimate from February.

Soybean acres are expected to reach 88.7 million from 87.2 million last year, and it would be the third highest acreage on record. The range is exceptionally wide, ranging from 86 million to 92.2 million.

UP OR DOWN?

Trade’s tendency to overestimate soybean acreage ahead of the March intentions report is very strong. Over the past 15 years, analysts’ average estimate has been underestimated only three times: 2008, 2014 and 2017. Over the past four years, analysts have been too high on soybean plantings in March by 2% on average.

The corn bias is more split, as analysts have understated and overstated March planting intentions three times each in the past six outings. The ratio of new crop futures, measuring November soybeans to December corn, may explain some of corn’s past misfires.

When this ratio is high at the beginning of March, ie favoring soybeans from the point of view of profitability, the trade always overestimates the corn acreage in March. When low and favorable for corn, March acreage is higher than analysts thought. But it is unfortunately less simple this year.

The new crop ratio averaged 2.31 during the first half of March 2022, and between 2.3 and 2.4 is the gray area for trade bias on corn acres. The biggest misses in either direction have occurred when the ratio is in this zone, but that slightly favors analysts who underestimate acres by five to three.

ALL ABOUT THE UNIVERSE

How much corn and soybeans U.S. farmers plant this year largely depends on how well they fit into the mix of total available acreage. One of the main reasons analysts missed those numbers last year is that they grossly overestimated the acreage universe.

The forecast corn and soybean acreage of 180.73 million acres is more reasonable than analysts thought last year. The 2021 total of 180.55 million narrowly set a new high, but the trade had forecast 183.2 million before the March report.

Combined cotton and small grains acreage is forecast to increase 1% from 2021, and all wheat plantings are forecast to increase 2.3% on the year to 47.8 million acres with increases across all the classes.

US farmers had two poor planting years in 2019 and 2020, the first due to weather conditions and the second because prices fell in late March due to the outbreak of the pandemic. Both events significantly reduced the total crop acreage, and the market thought the universe would rebound significantly in 2021.

Total acres of major crops recently peaked in 2014 at 326.7 million, but averaged about 319 million over the next four years. Analysts were very surprised at the 316.2 million reported in March 2021, as they were expecting something closer to 2014.

Last year, 317.2 million final prime acres were landed, well below previous averages, even with relatively cheap inputs and very attractive prices. The combination of much higher prices and production costs this year could also have a similar effect on total plantings, which could lead to another acreage shortfall with one or more crops on Thursday.

Karen Braun is a market analyst for Reuters. The opinions expressed above are his own.

Chart – Trading Bias for March 31 USDA Reportshttps://tmsnrt.rs/3qOswIb

(Editing by Matthew Lewis)

(([email protected]; Twitter: @kannbwx))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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