April 12, 2022
Recent USDA reports show numbers of soybean acres substantially rising and corn acres diminishing. What could this mean for the markets and your plans for the upcoming growing season? Kent Beadle, director of producer brokerage for CHS Hedging, explains.
The recently released USDA Prospective Plantings report revealed some surprising findings about the number of soybean acres that could be added in 2022 and the number of corn acres that could disappear.
“The USDA survey surprised the trade with a number of additional soybean acres — about 3 million more soybean acres than the average trade estimate,” says Kent Beadle, director of producer brokerage for CHS Hedging. “Those acres had to come from somewhere, so we had about 2.5 million fewer corn acres. And that has some implications.
“First, it told us that high fertilizer prices led to American farmers wanting to plant more soybeans,” Beadle notes. “Another factor was increased discussions around renewable diesel and the impact that is going to have on soybean prices.”
The report triggered new highs in new corn crop prices and a sizeable correction in soybean prices, Beadle says, as the market tried to account for the additional supply of beans that could become available.
Impact on farmers’ plans
Given the post-report price shifts and timing of the report — just as many U.S. farmers are putting planters into action — it’s possible the price shifts may move some acres from soybeans back into corn, says Beadle.
“We don’t think there’s going to be a large shift — maybe a half-million to a million acres at most — so there will still be more soybean acres and fewer corn acres than we thought, but we could see some shifts because of the price movements we’ve had,” he says.
Quarterly Grain Stocks report findings
While the USDA Grain Stocks report was less surprising than the Prospective Plantings report, it held some interesting information, as well. Corn stocks were slightly lower than average trade estimates, but pretty much as the marketplace had anticipated, says Beadle.
That means, for example, that USDA probably won’t need to do much with feed and residual corn usage on its next supply and demand revision,” Beadle notes. “It’s a little different story for soybeans. The average trade estimate ended up being below what the USDA gave us by about 29 million bushels. There’s an implication that either residual usage might go down a little bit or that eventually the USDA might actually increase the size of last year’s soybean crop, but not to the point where it’s going to have any major implications for price going forward.”
Risk management tips
Beadle offers these tips as you refine cropping plans in today’s volatile markets.
“At this time of year, growers should be taking a look at expenses and break-evens,” he says. “At CHS Hedging and AgSurionSM Risk Consulting, we try to plan for the gross dollars per acre required to make a return on assets and equity. Then we look at prices and determine if we can reach the desired objectives. In the volatile environment that we’re in, with sizeable moves every day, what growers should be doing is talking with their advisors and putting together a marketing plan that allows them to achieve their goals.
The material provided is for informational purposes and should not be viewed as a recommendation to buy, sell, or hold any commodity contract, investment or security, to engage in any risk management strategy or transaction, or to establish an account or relationship with CHS Hedging. This information is taken from sources which we believe to be reliable, but is not guaranteed by us as to accuracy or completeness. The information and opinions represented are those of the author, are subject to change and may be inconsistent with the views of CHS, Inc. or any of its subsidiaries.