Prospective Planting Report Adds Fuel to the Fire
April 4, 2008
The USDA Prospective Plantings report released on March 31, was one of the most highly anticipated reports in years. The commodity markets recognized that the plans for crop production this year will have dramatic impacts on supply and demand relationships, and consequently market prices.
The competition for crop acres has been fierce this winter with corn trying to hold on to the 93.6 million acres that were planted in 2007, and wheat and soybeans trying to acquire additional acres. The smaller acreage crops like dry beans, sugarbeets, and sunflowers are just trying to protect their small piece of the pie.
For Nebraska, the soybean increase is projected to be 1.2 million acres, and corn is expected to give up nearly 600,000 acres. These numbers were reflected in the immediate drop in soybean prices and an increase in corn prices on Monday, March 31. As the week has carried forward, both the wheat and soybean markets have recovered much of the Monday loss and December corn has moved above $6 per bushel. This would suggest that corn would like to acquire more acres, while wheat and soybeans are not willing to relinquish those acres.
In western Nebraska, sunflower acres are projected to decrease, while U.S. sunflower acres are projected to increase. Even with record high prices, dryland sunflower producers are looking at continued drought, so Nebraska acreage continues to fall. Dry bean acres are expected to increase in Nebraska, but drop nationally. Nebraska is the key production area for Great Northern beans, with nearly 85% of U.S. production, so the increase can be attributed to a strong ($38/cwt) Great Northern price. The three largest dry bean producing states (North Dakota, Michigan, and Minnesota) are all projected to reduce acres in 2008. These states are looking to increase spring wheat acres by nearly one million acres. Sugarbeet acres are also projected to be down across the U.S., while Nebraska acres increase. A reduction in sugarbeet acres could help strengthen sugar prices, allowing sugarbeets to retain their position as one of the most profitable crops in western Nebraska.
Higher corn prices will challenge the profitability of cattle, hog, and poultry operations in the short term. The ethanol and biodiesel industries also will face some concerns if crop prices remain at these levels for an extended time. The corn yield will need to remain at trend line (150+ bu/acre) this season to keep prices from moving to much higher levels. It will be in all of our best interests to hope for good moisture through the Corn Belt this summer.
The next USDA report on these numbers will be in late June. The markets will take note of the actual planting numbers along with crop progress and respond accordingly.
Monday's report gave producers another bit of information to use in making planting decisions. Typically, the corn intentions report is a little lower than farmers actually plant, while the soybean intentions are usually higher than actual. The winter wheat numbers are already in place, while spring wheat is expected to increase dramatically on the back of much higher prices on the Minneapolis exchange.
Extension Agriculture Economist
Panhandle Research and Extension Center