One of the most critical pieces of data which drives grain markets at this time of year is seeding intentions. Knowing how many acres of each crop are going to be planted in the spring is important to calculate the potential supply of each commodity for the coming year. With the South American harvest now well underway, there’s not much mystery left in knowing what Brazil and Argentina will produce. In March, the only really big unknown that the market has to react to is what farmers are going to plant in 2019.
Every year on the last day of March, the USDA releases its Seeding Intentions Report estimating the number of acres of each of the major field crops which their analysts predict American farmers will plant in the coming year. It’s really important for farmers as grain marketers to have a knowledge of what’s expected so that they can be ahead of the market when the seeding intentions are released on March 29.
It should come as no surprise to anyone that the United States is awash in soybeans. In the previous two years, they’ve grown record-big soybean crops, and with a trade dispute impeding their access to the world’s biggest soybean market in China, it is expected that more than a quarter of the 2018 American soybean crop will still be sitting in bins when we get to the 2019 crop harvest. Clearly U.S. farmers are going to plant fewer soybeans, but by how much?
Back in August of 2018, Farm Futures came out and predicted that U.S. farmers would plant 2.1-million fewer acres of soybean in 2019 than they did in 2018. That was only seven weeks after the Chinese tariff on U.S. soybeans had been implemented and had yet to fully impact price. By December of 2018, after the tariff had been in place for five months, Informa released an estimate of 2019 U.S. soybean planting intentions at 82.27-million acres. That’s 6.7-million acres fewer than the 88.97-million acres planted last year. The USDA’s wintertime estimates on 2019 crop soybean seeding suggest another shift away from soybeans in the year ahead, this time by 6.6-million acres.
That land is going to be deployed in growing other crops, and we’ve already seen a significant uptick in winter wheat acres sown last fall. Farm Futures estimated that American farmers planted 2.1 % more winter wheat last fall than they had one year earlier, jumping up to 33.6-million acres of winter wheat in 2019 from 32.7-million acres in 2018. Of the most significance to Ontario wheat producers is that American seeded acres of soft red winter wheat (the most common class of wheat grown in Ontario), is up 4.1 % from last year.
It seems that corn will pick up the biggest portion of U.S. cropland shifting away from soybean production in 2019. Of the reports that I’ve read, Informa has the most aggressive increase in American corn planting for 2019 at just a hair over 93-million acres. Considering that the entire U.S. corn crop in 2018 was only 89.1-million acres, even the USDA’s 91.5 to 92-million acre figure represents an eye-catching increase in corn production for the year ahead.
Although the forecast increase in U.S. corn planting is a little worrisome, there have only been two years (2017 and 2018) when American farmers have sown more acres of soybeans than acres of corn. Those two record-crop years are responsible for a big portion of the current soybean over-supply, but a return to a landscape where corn is the biggest field crop by acreage in the U.S. is actually a return to a more normal marketplace.
The idea that American farmers might plant about 92-million acres of corn and 83-million acres of soybeans in the spring of 2019 is not news. That information has been floating around the marketplace for a few months now, and is already factored into the futures prices. The marketing decision that Ontario farmers need to formulate in their mind is what to do if the USDA’s seeding intention’s release on March 29 is different than what the marketplace expects to see. It is possible that we could see the USDA predict 85-million acres of soybeans being planted (4 million less than last year), and see the prices plummet because it’s substantially more than the 82 or 83-million acres factored into today’s price. The marketing opportunities lie in the deviations from what was expected in the report. So prior to the report’s release, develop a familiarity with what’s expected, and a plan for what you’ll take advantage of if the report offers a surprise.
Steve Kell operates a crop farm in Simcoe County and is a grain merchant for Parrish and Heimbecker Ltd. in Toronto.
