The Official Kick-off to the Planting Season! - Mar 31

The Official Kick-off to the Planting Season!

March 31^st, 2011

Planting Intentions

March 31^st is here, and it is one of my favorite days of the year!  Due, of course, to the release of the USDA Prospective Planting report, the first official estimate of what U.S. farmers will put in the ground.  The report often sends markets flying or crashing on unexpected numbers; today’s planting intentions however failed to provide any surprises.  As expected, corn acreage made gains at the expense of soybeans, with slightly more acres going to corn and slightly fewer acres going to the beans than was expected coming into the report.  Compared to last year however, corn has made significant gains.  Last year farmers planted 88.79 million acres of corn, and plan on seeding 92.17 million this year.  Farmers planted 78.96 million acres of soybeans last season, and will reduce plantings to 76.6 million acres this year.  One of the big factors driving this decision was the relative strength of new crop corn versus soybeans (December contract for corn, and November contract for soybeans).  One week ago, this ratio was around 2.17:1, making corn much more profitable than soybeans.  Generally this ratio is in equilibrium around 2.30 – 2.40 and over the past week the market adjusted, moving back in favour of soybeans, currently at 2.30.  Over the coming month, new crop soybeans may outperform corn in an attempt to prompt farmer to change their minds and plant beans instead.  From here, the markets will be at the mercy of Mother Nature, and traders will be watching weather for problems getting the crops planted.

Ending Stocks

Corn bulls will breathe a sign of relief at today’s stocks report, as traders have been whispering about a potential unexpected jump in supplies due to the USDA ‘finding’ more corn.  This did not materialize, and quarterly stocks came in below expectation at 6.523 million bushels.  This is very supporting of old crop corn futures, which are increasingly tight.  Soybean stocks are also lower than expected on strong export demand, particularly from China.  This should provide support to the grain complex.