Corn and soybeans have stayed fairly range bound this week while wheat and cotton got to show some more volatility. China had a national holiday for the Lunar new year early in the week so export news was slow. USDA had their outlook forum this week. This is not farmer surveys, it is just baseline estimates from USDA’s economists. They estimated total acreage of corn beans and wheat at 227.0 million acres which is up from last year’s 218.3 million. That estimate was just below the average trade guess so it was not enough of a chance to really influence the market much. USDA had corn at 92.0 million acres (compared to last year at 90.819 and average trade guess at 92.9) and beans at 90.0 million acres (compared to last year’s 83.084 and trade guess of 89.8). The combined 182 million corn and bean acres sets a new record with the old highest at 180.4.
These numbers are just the starting points and they set records for acres planted. Even if they are achievable and actually realized, we still need great yields just to maintain the balance sheet levels and they are very tight. We finally have an acreage battle on our hands after waiting more than 5 years. Weather is going to be extremely important this spring and throughout the whole growing season. So far in this rally, new crop has lagged old crop. As we head into planting and our growing season, that will change. Even today you see old crop beans up 2 and new crop up 10. Old crop corn is down 7 and new crop is up a penny. There are lots of questions about where we are going to get these acres from. We have had a lot of prevent plant acres the last few years that will give us some of the increase. The added acres will probably come from the plains and western corn belt states that are most vulnerable to La Nina weather issues. The planting and growing season should be very exciting!
Brazil continues to fall behind on harvest and therefore further behind on getting the second crop corn planted. China is waiting on South America beans but may not be done buying from us. Exports on corn and beans were both within expectations and large. The US crush report showed record US bean demand so we have not even started rationing domestic demand.
What To Do
The upside may be somewhat limited near the old highs just above $14 on soybeans until we know more about the South America crop. Corn will be watching demand. Corn prices have not backed off in China and they continue to buy. Bean lines are starting to slow down at processors and basis should start strengthening. If you need to move beans before warmer weather, there is nothing wrong with selling the basis levels we have now but they should strengthen significantly. I would be scaling in small sales on old crop but being more patient on new crop on beans.
Corn basis has leveled off and has had a hard time gaining any strength. Keep a close watch over the next week or so for opportunities on a train delay due to all this winter weather. Most feedmills tried to go in full, but there may be enough of a slowdown to cause concern and add some basis. Sell premium corn basis, even if you are not ready to price. Corn basis will get stronger in the summer, but it may take a while to appreciate. Same as with beans, sell small on up days. Be patient on new crop.
Wheat
Wheat took the lead a few days this week as record cold weather threatened any crops without snow cover to protect them. However, we barely know what wheat will yield a month before harvest, much less four months. So we have a very hard time estimating how much damage is or was done. The market still feels the need to put a risk premium in though. Have orders working up close to 7 to hedge some more. Do not sell any basis. Corn basis is going to get very interesting this summer and if the corn wheat spread tightens up we may be able to sell feed wheat close to $7 flat.
Cotton
The outlook conference penciled cotton acres in at 12 million which is the same as this year. However, with yield down and demand up we have trimmed the balance sheet a lot since last year at this time. Cotton is much tighter and with the positive economics the market is pricing in the picture is much brighter. There has not been near as much fund money coming into cotton so far either so there is more room for that. Cotton is going to have to work to make sure it gets the 12 million acres too. $0.85 is not a bad place to start pricing cotton for new crop but I would not do a lot yet. The story of new crop still has a lot to be told.