USDA’s Prospective Plantings report issued on Thursday surprised many with an estimated 93.6 million acres for corn. That would be 6% more acres planted to corn than last year and about 4 million acres more than estimates heading into the report. If realized, this would be the most corn acreage in the United States since 2013, and would be the third most since 1944.
Chris Hurt, Purdue University agricultural economist, explains the increased planting intentions for corn are prompted by the world surplus of wheat and reduced sorghum demand from China.
Conversely, the report indicates that farmers expect to reduce their acreage of both wheat (9% fewer acres) and sorghum (15% fewer acres) and replace it with corn and cotton (11% more acres).
The reduction in wheat acreage is related to low prices from the surplus of that crop and increased international competition, Hurt says. The lower demand for sorghum is the result of reduced use in Chinese feeding rations, causing sorghum prices to drop relative to corn.
“The bottom line is that 93.6 million acres is too much corn acreage that—with normal yields—will cause further building of already-large corn inventories,” Hurt says. “Production would be expected to move above 14 billion bushels, with corn prices at harvest falling to the lower $3 per bushel.”
Keep in mind that the USDA report is a nationwide survey of 83,000 farm operators that was conducted the first two weeks of March.
Hurt wonders if some of those surveyed might have over-estimated their total acreage numbers. As an example, he notes that survey respondents in the Corn Belt indicate they plan to plant upwards of 1.5 million more acres in corn, as well as 840,000 more acres of soybeans, along with more wheat acres.
Nationally, farmers intend to plant 82.2 million acres of soybeans, down less than 1% from last year’s 82.6 million acres. At the same time, soybean stocks were about 40 million bushels less than expected, but 15% more than a year earlier, according to the USDA Grain Stocks report, also released this week. Hurt says the levels of acreage and stocks would mean soybean prices for the 2016 marketing year averaging about $9 per bushel.
“These reports together suggest that the market prices of corn and soybeans will now adjust to give producers reduced financial incentives to plant corn and increased price incentives to plant more soybeans, spring wheat and other spring-planted crops,” Hurt says.
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