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Column: Will the record U.S. corn, soy acreage bet succeed this time?

FORT COLLINS, Colo. (Reuters) - Three months ago, market participants were nearly certain that U.S. farmers in 2021 would plant a record number of combined corn and soybean acres since new-crop prices had risen to multi-year highs amid red-hot demand and disappointing harvests.

Soybeans are harvested from a field on Hodgen Farm in Roachdale, Indiana, U.S. November 8, 2019. REUTERS/Bryan Woolston

Not only were analysts incorrect back in March, but it was their worst miss of corn and soy planting intentions since at least 2005 as they overshot the actual by 4.5 million acres.

The U.S. Department of Agriculture’s statistics branch resurveyed farmers earlier this month with the results due on Wednesday at noon EDT (1600 GMT), and the trade estimates are once again lofty.

The average guesses for corn plantings at 93.787 million acres and soybeans at 88.955 million would combine for 182.74 million acres, easily passing 2017’s high of 180.33 million. That would also be 4 million more corn and soy acres than in March, a record March-June jump.

Within the last four decades, the biggest March-June increase in corn plus soy plantings was 3.5 million acres in 2009 followed by 3.3 million in 2014, the latter of which was driven entirely by beans.

Corn plantings are seen rising a record 2.64 million acres or 2.9% from March, surpassing 2007’s 2.4 million-acre hike. The predicted soybean increase of 1.36 million acres would be the largest March-June rise in five years but well off 2014’s record.

In the past, the biggest March-June acreage changes have been to the downside. The 4.6 million-acre drop in 2019 soybean plantings came after historic flooding and field work delays, and the 5 million-acre plunge in 2020 corn plantings followed a huge drop in price and demand as the pandemic began.

It is noteworthy that all 26 analysts polled by Reuters believe corn and soy area will reach a new record with the lowest combined estimate at 181 million acres. None of the analysts see the possibility for corn or soy area to fall or be unchanged from March. The highest combined estimate tops 186 million acres.

CASES TO MAKE

Last year’s decline in corn acres was outside historical bounds so no one was considering the possibility at the time, but it was easier to see in hindsight. Unprecedented things have also happened this year, potentially defending the record expectations.

The biggest standout is the rally in new-crop December corn futures. By the first week of May, typically one of the busiest planting weeks for U.S. farmers, December corn had risen by at least a third since March 1. No other year in the last half-century featured a remotely similar increase.

November soybeans also climbed nearly 20% in that time frame, not quite a record but close, though the rise in corn was relatively larger and therefore futures prices would have implied a better increase for corn profitability.

The weakness in this argument is that prices and apparent profitability should have been attractive in early March when USDA conducted its first survey, yet farmers’ plans fell well short of expectations. The corn and soybean crop insurance guarantees, which are the averages of new-crop prices during February, were seven- and eight-year highs, respectively.

Further, the year-on-year February price increases of 18% for corn and 29% for soybeans were 10-year highs. But many farmers after March intentions reported that the rise in input costs, including rent, ate in to profits, which in some cases were not nearly as high as they appeared to the market.

Aside from the unusually strong spring rally, another factor that could support a larger increase in acres is that the weather was favorable for spring planting. U.S. farmers planted corn and soybeans at an above-average pace this year.

WHERE DO THE ACRES COME FROM?

Competition among crops can sometimes prevent dramatic overall acreage increases. Corn and soybeans steal acres from each other all over the Corn Belt while popular regional crops like sorghum in Kansas, cotton in the Delta states and edible beans, canola and wheat in North Dakota can cut in to corn and soy area.

Market participants are likely assuming there are extra acres available because of low total plantings in March. Principal crop acres were reported at 316.2 million, a big recovery from the previous two problem years but below the 319.3 million acres planted in 2018.

The trade estimates have made a little room for corn and soy because combined wheat, cotton and small grains plantings are seen down a half percent. Kansas and North Dakota are considered corn and soy “swing” states since year-on-year changes in area are relatively larger than in other states.

Analysts see sorghum acres at 7.13 million, a six-year high and up slightly from March. Last year, Kansas planted 51% of the national sorghum area. North Dakota plants nearly half the U.S. spring wheat, and the trade pegs those plantings at a four-year low of 11.4 million acres, about 3% below the March figure.

Intentions showed North Dakota’s corn and soy acres at 10.3 million acres, close to 2017’s record of 10.5 million, so switching between crops might be more likely than overall expansion. However, if North Dakota farmers ramped up corn and/or soybean area, it is worth noting that the state’s crops are in just about the worst condition they have ever been due to extreme drought.

Within the last two decades, the largest state-level, March-June increase in combined corn and bean acres is 700,000. That has happened in Illinois, Minnesota and both Dakotas, but they all occurred in different years.

Individually by state, it is not that common for both corn and soybean acres to be higher in June than in March. In fact, that has never happened in Iowa or Indiana since at least 1998, and it was observed only twice in Illinois. Dual increases last occurred in Nebraska in 2013, but Minnesota pulled it off in 2016.

The opinions expressed here are those of the author, a market analyst for Reuters.

Editing by Matthew Lewis

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