We are now at a stage of the production year where we’re getting a better indication of what we may see for planted acres in the United States. In the March planting intentions report, numbers of 97 million corn acres and 83.5 million soybean acres were released. These numbers were derived from surveys, and several factors have changed since being released.
For one, the outbreak of COVID-19 greatly impacted commodity demand, both in the United States and around the world. The most talked about of these was ethanol, where a large number of U.S. manufacturers idled plants. A lack of transportation weighed on all energy needs as many states and countries issued stay-at-home orders. This lack of demand cut into corn demand and in many cases eliminated it altogether. Regions of the United States that depend upon ethanol manufacturing for the majority of their corn demand are now faced with taking the chance of planting a crop and hoping profitability returns or looking at alternative crops, mainly soybeans.
Weather conditions represent another change since the March intentions were released. While many regions of the Corn Belt have been able to complete fieldwork in a timely manner, others have been delayed due to a repeat of last year’s wet soils. This is especially the case in fringe areas, some of which still had to complete harvest from a year ago. The most notable of these is North Dakota which is still struggling to wrap up last year’s corn harvest. While there is still plenty of time to get crops seeded in these areas, farmers may rethink their earlier crop intentions given these changes.
One factor that may counter some of these worries on corn production in the United States is issues with South American crops. Weather has been less than perfect in both Brazil and Argentina for the past growing season and reduced crops from their early expectations. While soybean production from South America will still be record-sized, the same may not be true on corn. The Safrinha crop in Brazil is being hindered by drought conditions which will reduce the country’s export ability. Brazil already had a deficit on corn from over-exporting last year’s crop, and large production was needed to replenish inventory. A smaller Safrinha crop means more will be needed for this and less will be available for export.
While all this attention has been placed on corn, just as much should be on soybeans. Given the changes to corn market dynamics, we will likely see an increase in soybean plantings this year. To see an increase of 2 to 3 million acres from the current planting estimate would not come as a surprise. This may not be as negative as in a normal year since the U.S. crush pace has ramped up considerably in recent months. We have also seen an increase in exports as buyers return to the import market, mainly China.