Acreage Decisions Will Be Battle Royal

Corn Appears to Take Early Lead in Acreage Fight, but Soybean Supplies Raise Concerns

Katie Micik Dehlinger
By  Katie Micik Dehlinger , Farm Business Editor
With tight balance sheets for corn and soybeans, analysts say there's little room for adverse weather conditions, and the current Drought Monitor is one potential cause of concern. (National Drought Mitigation Center graphic)

MT. JULIET, Tenn. (DTN) -- Spring is here, and while farmers are itching to get into the field, market analysts are deep into their annual acreage guessing game.

On Wednesday, USDA will release its survey-based acreage estimate, the Prospective Plantings report.

Analysts tell DTN that predicting planted acreage is especially difficult this year. Between strong Chinese demand for corn, last fall's open window for fieldwork, strong crop insurance guarantees and forecasts for a dry-to-normal planting season across the Corn Belt, many are placing bets on higher corn acres.

However, that leaves the soybean balance sheet in a precarious place. With soybean stocks forecast to be some of the tightest on record, anything less than 90 million acres (ma) would barely maintain the status quo, and that's assuming cooperative weather and trend-line yields.

"Appetite for both crops are pretty darn big, and especially now that we're going to start a new season with far less supplies than we've seen the past seven years," DTN Lead Analyst Todd Hultman said. "We've got a pretty bullish scenario for both corn and bean prices. That doesn't seem likely to disappear quickly."


To complicate matters, spring wheat and cotton prices have both rallied in recent months, and Hultman said droughty conditions across the Western Corn Belt could lead farmers to plant extra sorghum as a type of "drought insurance." In the Dakotas, where 6 ma to 7 ma were prevented from being planted last year, canola and sunflowers could also join the acreage melee.

This year's shaping up to be a battle royal, and it reminds Hultman of why the Prospective Planting report makes him cringe.

"The survey can -- like last year -- the survey can distort the market," Hultman said. Last year, USDA reported that farmers intended to plant 97 ma of corn. The June Acreage report corrected that figure down to 92 ma. "It left us with really bearish corn estimates" for months, he noted.

Hultman said he is starting out the crop year by penciling in 92 ma a piece for corn and soybeans. That's a little higher on soybeans and lower on corn than others in the industry, but he said he thinks it's the maximum each crop could pull based on historical acreage.

A survey of market analysts by Dow Jones Newswires puts corn acres between 92 ma and 94.5 ma, while soybean acreage is anticipated to fall between 88.9 ma and 91.3 ma. USDA said it anticipated farmers will plant 92 ma of corn and 90 ma of soybeans at its Agricultural Outlook Forum in February.

Joe Lardy, a research analyst with CHS Global Research, said the soybean-to-corn price ratio has been stuck at 2.5-to-1, which is historically a no man's land with no clear winner.


Many farmers took advantage of last fall's open window for fieldwork to apply fertilizer. "There's money sunk into corn acres, and it's going to be very hard to pry those away," Lardy said.

Hultman said many fertilizer retailers saw higher-than-expected demand last fall. As they've rebuilt stocks, they've raised prices. According to DTN's weekly survey of fertilizer retailers, the average price of anhydrous has jumped to $671 per ton, up 27% from the prior months.

You can read the most recent Retail Fertilizer Trends column here:….

Farmers that locked in prices early have a real advantage, Hultman said, adding that higher fertilizer prices could discourage other farmers from planting corn.

In addition, the crop insurance price guarantee for revenue products, which a majority of Corn Belt farmers purchase each year, is the highest in years at $4.58 per bushel. If a farmer carries 80% coverage, that works out to an average price of $3.66, which is higher than what the market has paid farmers in recent years.

Click here for more details on crop insurance guarantees:…

That price, which is determined by averaging the daily close of the December corn contract each day in February, was heavily influenced by Chinese corn purchases. Ken Ericksen, a senior vice president at IHS Markit, said on a webinar that China could import up to 25 million metric tons (984 million bushels) of corn this year.

USDA is being very reserved in the way it is accounting for Chinese demand on the supply-and-demand balance sheet because of China's tariff rate quota system, but China isn't the only buyer on the block, Ericksen said.

"If you look at other places around the world, Japan has come back with more demand, as has South Korea and Vietnam," he said. "After a while, it all adds up. Unlike soybeans, where there's essentially one very, very large market in China, you have a lot of spread for corn. We're looking at a setup here of more upside potential for U.S. corn exports as we move through into the summer."

Also in corn's favor: a dry weather forecast for much of the U.S.

For more, see:…

When planting weather is good early, farmers tend to keep planting corn, Lardy said.

"Given the current corn prices, there's a profit margin to grow corn," he said. "There's, I think, an old fallback in thinking 'I can grow my way out of a problem with corn. If Mother Nature cooperates, I can grow my way into profitability,' and that mentality doesn't seem to exist so much for some of the other commodities," said Lardy.


USDA's ending soybean stocks forecast for the 2020-21 crop year is 120 million bushels (mb) with a historically tight stocks-to-use ratio of 2.6%.

"The market seems shy about rewarding a higher new-crop price on the beans, and I think they certainly deserve a higher price than what they're showing right now," Hultman said. "To be honest, I'm not sure what the reluctance is other than just kind of a fear of the future, and there's plenty of uncertainty."

Lardy agreed, adding that he thinks the soybean forecast is one of the most critical pieces of USDA's upcoming report. "With the balance sheet as tight as it is, we really need to get 90 ma," he said. "The market is going to have to do some work to buy those acres, or it's going to have to change the price structure, so we find a way to ration demand."

If U.S. acres come up short on soybeans, the U.S. could turn to imports. USDA could also use a negative residual figure, like it did in July 2014, to balance its supply and demand estimate.

For more on the role residual plays in the soybean balance sheet, see:…

Razor thin margins also leave no room for an adverse weather event. Soybean yields have exceeded trend-line expectations in six of the last seven years, Lardy said, noting that corn has done the same in five of the last seven. Statistically, each year starts off with 50-50 odds of exceeding or falling below trend. Farmers are generally optimistic with those odds at the start of planting season, but Lardy said he likes to be a little bit more conservative since so much lies in the hands of Mother Nature.

"If you look at the Drought Monitor today, it looks like a Bob Ross painting. There's color everywhere," Lardy said. That gives him some cause for concern, as does the potential for a resurgence of African swine fever in China.

China's agriculture ministry recently announced that 7 million to 10 million hogs were recently affected by the virus, but that's miniscule compared to the size of the whole herd. IHS's Ericksen said China's made structural changes to the hog industry. By going from a backyard or village model to the more industrial "hog hotel" model, the Chinese have placed new emphasis on biosecurity. "That's really stabilized and brought back quite a bit of the demand we see today."

Even in the peak of China's ASF outbreak, demand for soybeans and feed grains didn't really drop; it was diverted to the poultry market, Ericksen said.

You can view of replay of the webinar including Ericksen and Lardy here:…

The shift to a more industrial hog production model has also created a structural change in the feed ration, Lardy said. While China's ag minister recently encouraged feeders to diversify away from corn and soybean meal, there's only a limited amount that can really shift.


Lardy said it's easy to discount wheat in the acreage race. "Wheat just feels like it's going to continue to be the outsider in this market and as we've seen, the U.S. farmer has clearly shown a preference for corn and beans."

While prices in the mid-$6 range for spring wheat isn't the highest they've ever been and the current stocks-to-use ratio of 39.1% is comfortable, there's potential for a bullish story to develop. Ericksen noted that wheat feeding is on the rise globally, not just in the U.S. With Russia front-loading exports ahead of anticipated tax hikes, it could create room for more U.S. exports.

The February cold snap could also take a toll on winter wheat yields, but the impact will be hard to gauge until harvest.

For more on weather and wheat, read:…

"If we have a situation where we shift a lot of acres away from wheat, and we come to find out that we did a decent amount of damage with that cold snap, there's a potential for an interesting bullish story for wheat," Lardy said.

Hultman said sorghum also has an interesting story. While it's unlikely to steal many acres away from corn or beans, it could make a dent in cotton acreage, particularly in the western Plains. "Even with cotton's big rally, sorghum is just as, if not more, profitable than cotton. And the nice thing about sorghum is you can harvest it earlier than cotton, so you can get your check quicker."

Hultman said he's even heard of dryland farmers in Nebraska that are going to plant sorghum this year as a "drought insurance" crop that can substitute for higher price corn in cattle rations.

Lardy said he's watching the Delta region to see if cotton gets a boost. "We've seen a decent rebound in cotton prices, and that's really put cotton back in the mix. To me, that becomes important because you're talking about the Delta beans."

Farmers in the Delta are usually some of the first in the nation to begin soybean harvest. While most of their production heads straight to export markets, they also play a role in supplying the southeast's livestock feeding operations. More cotton in the Delta could contribute to larger soybean imports.

The National Cotton Council surveyed its members in January and found its growers intend to plant 11.5 million acres, a 5.2% decline from last year.

Hultman said he thinks short-season soybeans could be a popular move this year because of the way prices are laid out. "If you can get August or September harvested soybeans, you're getting a nice little bonus on your price versus the November contract."

He thinks that gives southern growers an incentive to plant beans and thinks that short-season beans will be an overall trend this year.

However Mother Nature plays her hand this year, "the acreage battle is real," Lardy said.

For more of Hultman's thoughts on the upcoming Prospective Plantings report, see:…

Katie Dehlinger can be reached at

Follow her on Twitter @KatieD_DTN

Katie Dehlinger