U.S. acreage season kicks off as CBOT corn, soy battle year-ago levels -Braun

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NAPERVILLE — The talk of US acreage for 2023 started many months ago, but Chicago futures prices in February will provide a solid piece of that puzzle, and corn may make a better case than soybeans right now.

CBOT futures for corn and soybeans for new crops both start near all-time highs from February, theoretically boding well for US farmers as their 2023 insurance guarantees are driven by that month’s average prices.

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But futures, particularly soybeans, could soon fall sharply from last year’s pace on last February’s unusually strong rally, which was linked to crop failures in South America and escalating tensions in Ukraine. This year, a record Brazilian soybean crop will keep the pressure on.

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On Wednesday, December corn closed at $5.96-1/4 a bushel and November soybeans at $13.60-1/4, up 0.5% and down 1% respectively from their January averages . That compares to $5.78 and $13.82 on the same date last year.

There’s no solid seasonality for February new crop prices, but last year’s gains were the strongest of the month in over a decade at 5% for corn and 9% for beans. The 2022 corn guarantee was $5.90 a bushel, the highest since 2011 and $14.33 for soybeans, an all-time high.

February 2021 gains were also multi-year highs then, but average February prices have typically fallen within 3% of January prices in recent years. The biggest losses in both percentage and absolute terms came in February 2009 when corn fell 32 cents (7%) and soybeans fell 91 cents (9%).

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SMALLER POOL?

Over the past two years, stronger insurance guarantees have led many market participants to overestimate the total acreage US farmers would plant, potentially by as much as 10 million acres.

However, many analysts seem to have accepted that the US acreage pool may be shrinking, or at least staying the same, rather than expanding back to the highs of the past decade in response to price. Combined corn and soybean acreage estimates are now closer to 178 million to 180 million instead of 183 million — up two years ago, which keeps primary crop acreage reasonably competitive.

But despite a tighter pool of acres and persistently high prices, the phrase “arable land battle” popular for the last two years was absent this year as rising production costs and market uncertainty have heightened caution among US producers.

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Some U.S. farmers, particularly in rotation areas, bought 2023 seed this past fall, and purely from a forward-looking perspective, corn looked a little better then than it does now. In mid-October, November 2023, soybeans averaged $13.53 a bushel versus corn at $6.24 in December, bringing the bean-to-corn ratio to 2.17, a 10-year low for that date.

That ratio is now at 2.28, a seven-year low for this week and equal to 2016 levels. Values ​​of 2.5 or greater clearly favor soybeans, while values ​​near or below 2.3 favor corn.

Fertilizer prices remain high but have fallen since last fall, which bodes well for corn profitability prospects unless corn prices fall significantly.

NORTH DAKOTA

Excessive spring rains last year caused record planting delays in North Dakota, where corn, soybean, wheat and other acreage is being delayed more than any other state. The spring wheat insurance price is also set in February, and half of the US spring wheat crop is grown in North Dakota.

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Some analysts thought last year’s planting delays would crowd out North Dakota wheat fields in favor of corn and soybeans, but the opposite happened. The state’s spring wheat plantings ended higher than originally intended, while corn and soybean acreage ended lower.

This was motivated by the rise in Minneapolis new crop wheat futures, which were well above $13 a bushel during May’s sowing season. Still, 2022 spring wheat acreage in the US was down from both intentions and the year before.

Last year, February new-crop spring wheat futures averaged $9.19 a bushel, the highest since $9.89 in 2011. September futures closed Wednesday at $8.95 a bushel versus around $8.80 same day in 2022.

North Dakota’s Crop Watch producer says spring wheat is the least enticing at current price levels due to high fertilizer costs for 2023. Corn and some specialty crops are the most attractive, although soybeans can be money losers. Karen Braun is a market analyst at Reuters. The views expressed above are her own.

(Writing by Karen Braun Editing by Matthew Lewis)