Markets Now with Tyne Morgan: Explosive Acreage Debate Shaping Up for 2021
The record cold this week that blasted much of the U.S. may make it feel like planting season is a far cry from today, but April 1 is less than seven weeks away. As farmers nail down planting decisions for the new growing season the acreage debate is starting to heat up.
“I think it's shaping up to be a really interesting spring timeframe,” says Chip Nellinger of Blue Reef Agri-Marketing. “I've been a little bit surprised in the fact that we've seen a couple private estimates already out, as well as farmer’s type surveys, and the corn number ended up being a lot higher than what I would have really thought. This is going to shape up to be a really interesting spring.”
Nellinger says the economics today favor planting soybeans, however, there are a number other factors that could support higher corn acreage, as well.
“When you look at the input side on corn, a lot of farmers were able to book some of their inputs at cheaper cost levels before nitrogen fertilizer shot through the roof,” says Nelliger.
He says it’s not just a battle of corn versus soybeans this season. Climbing prices for crops like wheat, sorghum and cotton could also compete for acres.
Crop Mix Competition
“Three months ago, a lot of people in the Mid-South were saying, ‘hey, I'm going to plant more beans and less cotton, but the cotton market heard those whispers and has woken up here recently, which shot cotton straight through the roof. So, there's a lot of competition here amongst a lot of different crop mixes,” he notes.
Nellinger says while the economics may favor one crop over another today, he never underestimates farmers’ ability and eagerness to plant corn.
“On the case of corn, it's going to boil down to Mother Nature, as it always does,” he says. “If we get a good early, open planting window, I think it favors corn. It always does historically. But it's going to be interesting because we've got such tight stocks that we need to increase supply and have good yields and good crops. But how that acreage mix is going to pan out is anyone's guess at this point.”
How Many Acres Does the Market Need?
American Farm Bureau Federation (AFBF) chief economist John Newton says you also have to remember there will be more total acres planted this year, mainly due to drier conditions this fall.
“I think one area to look at is previous prevent plant,” says Newton. “In 2019, we had nearly 20 million acres classified as prevent plant. Last year, we had 10 million acres that qualifed for prevent plant. You could see some of those 10 million acres maybe come back online in corn and soybeans.”
Newton says National Cotton Council’s (NCC) early look at acreage, which is a survey-based assessment, also revealed a possible situation where a portion of the cotton acreage disappears.
“Last week, the Cotton Council did come out with their first estimate of cotton acres, actually showing it go down to 11.5 million acres this year,” says Newton. “But there is going to be an intense competition for acres. I think the spring crop insurance prices will also give us a good signal on which way acres are ultimately shakeout.”
Spring Crop Insurance Price Piece of the Puzzle
Nellinger says farmers can’t discount how the spring crop insurance price could be utilized as a tool this year.
“From a new crop perspective, it's critical as far as the individual marketing plan,” says Nellinger. “I've been looking at some numbers here, and obviously, we don't know fully what the February average price is going to be yet for corn and beans, but in a lot of cases in corn, we're going to be able to cover some pretty good levels.”
He notes that while the average price levels may show an improved picture, he advises farmers to realize volatility will also play a roll.
“I think two things if there's producers out there, and they haven't started looking at prices, a be ready for some sticker shock, because not only are prices well above what we've seen the last few years, but the volatility factors increase,” Nellinger says. “And this is not going to be cheap this year. But if you look at what the what the revenue guarantees are, in the case of corn, as well as even in some cases beans, you’re able to cover the cost of production, maybe even a slight profit.”
Nellinger says the guaranteed crop insurance price could provide some cushion this year.
“That’s good from a standpoint of being able to be patient through this volatility,” he adds. “If we happen to go lower, always fall back on what your spring revenue guarantee is and don't make decisions below that until you get closer to pollination and beyond allows you to have a little bit of patience to see if those rallies are going to come.”
USDA’s first survey-based acreage estimate will come out at the end of March, but the agency will give the first glimpse of the acreage forecast during the Ag Outlook Forum next week.