Will U.S. corn intentions thump the market for a fourth straight year? -Braun

Author of the article: FORT COLLINS — Market participants have spent several months discussing 2022 acreage possibilities in the United States, but all the early anticipation and analysis have not recently provided much value, especially when it comes to corn planting intentions. Insurance guarantees for U.S. farmers this year are record- high for soybeans and…
Will U.S. corn intentions thump the market for a fourth straight year? -Braun

Author of the article:

FORT COLLINS — Market participants have spent several months discussing 2022 acreage possibilities in the United States, but all the early anticipation and analysis have not recently provided much value, especially when it comes to corn planting intentions.

Insurance guarantees for U.S. farmers this year are record- high for soybeans and very close to record for corn. But the high cost of inputs and uncertain availability, especially for fertilizer, have some analysts doubting a large corn area is possible.

The U.S. government’s first survey-based estimate for 2022 spring plantings will be published on Thursday at noon EDT (1600 GMT). The Department of Agriculture’s statistics service will also release quarterly grain stocks, which like acres can also have an unpredictable nature.

The last trading days in March and June, the latter of which also features acreage and stocks data, produce two of the most historically volatile days of the year in Chicago futures.

On March 31, 2021, CBOT corn and soybean futures surged the daily trading limits after industry estimates overestimated combined U.S. corn and soy plantings by 4.5 million acres. That miss was among the worst in recent decades.

March corn intentions fell outside of the range of trade guesses in each of the last three years, though that has not happened for soybeans since 2018 due to a wider range of soy guesses versus corn in recent years.

Analysts peg 2022 U.S. corn plantings at 92 million acres with a range of 89.7 million to 93.5 million. That compares with 93.4 million a year ago and is identical to USDA’s tentative estimate from February.

Soybean acres are seen rising to 88.7 million from 87.2 million last year, and that would be the third-highest area on record. The range is unusually large, spanning from 86 million to 92.2 million.

HIGH OR LOW?

The trade’s trend of overestimating soybean acres ahead of the March intentions report is very strong. In the last 15 years, the average analyst estimate was smaller than the actual only three times: 2008, 2014 and 2017. In the last four years, analysts have been too high on March soy plantings by an average of 2%.

The corn bias is more split, as analysts have under- and over-guessed March planting intentions three times each within the past six outings. The new-crop futures ratio, measuring November soybeans against December corn, can explain some of the past corn misses.

When that ratio is high in early March, i.e. favoring soybeans from a profitability standpoint, the trade always overestimates corn acres in March. When it is low and corn-favoring, March acres come in higher than analysts thought. But it is unfortunately less simple this year.

The new-crop ratio averaged 2.31 in the first half of March 2022, and between 2.3 and 2.4 is where the gray area is for the trade bias on corn acres. The biggest misses in both directions have happened when the ratio is in this zone, but it slightly favors analysts under-guessing acres by five to three.

ALL ABOUT THE UNIVERSE

The amount of corn and soybeans U.S. farmers plant this year largely depends on how they fit into the mix of total available crop acres. A big reason analysts missed these numbers last year was because they significantly overestimated the acreage universe.

The predicted corn-plus-soy area of 180.73 million acres is more reasonable than what analysts were thinking last year. The 2021 total of 180.55 million narrowly set a new high, but the trade had been thinking 183.2 million ahead of the March report.

Combined cotton and small grains acres are seen up 1% from 2021, and all wheat plantings are expected to rise 2.3% on the year to 47.8 million acres with increases in all classes.

U.S. farmers had two lousy planting years in 2019 and 2020, the first due to weather and the second because prices had plunged by late March due to the pandemic onset. Both events significantly reduced total crop acres, and the market believed that the universe would significantly rebound in 2021.

Total principal crop acres recently peaked in 2014 at 326.7 million but averaged around 319 million in the subsequent four years. Analysts were very surprised at the 316.2 million reported in March 2021, as they expected something closer to 2014.

Final principal acres landed at 317.2 million last year, still well below previous averages, even with relatively cheap inputs and very attractive prices. This year’s combination of much higher prices and production costs could also have a similar effect on total plantings, and that could lead to another acreage miss with one or more crops on Thursday. Karen Braun is a market analyst for Reuters. Views expressed above are her own.

(Editing by Matthew Lewis)

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