Less Than a Week Away from USDA's Official Acreage Survey, Yet That's Not What's Moving the Markets

The countdown is on for USDA’s March Prospective Plantings report, and less than a week away, it seems the market isn't consumed by possible acreage outcomes. Instead, it appears outside interest fueled prices this week.

“With the Federal Reserve announcement in the U.S. about interest rates, it seems as though the outside money is looking at commodity markets as a hedge against inflation again, so we're seeing that outside money kind of come back into the markets here this week, and really getting interested, especially in the wheat market again,” says Bailey Elchinger of StoneX Group.

Just this week, President Biden warned food shortages are a real threat following sanctions placed on Russia. He called the food shortages “real,” as he acknowledged Russia and Ukraine have been the breadbasket of Europe in terms of wheat.

“I think the dilemma is we have to look at the volumes involved, and then the price is kind of residual from it,” says Al Mussell, research director with the Canadian Agri-food Policy Institute. “We don't have past experience with these kinds of shifts in volumes. When you're short, the prices are going to go up. But I can say, as an economist, I don't know by how much and I don't think really anybody does. The dilemma is that our stocks are short, and a lot of those stocks are in places where they're unlikely to be redeployed to areas of scarcity.”

Mussell’s honest answer underpinned the larger concern about global grain supplies. The situation was already tight, but now with issues in Ukraine, coupled with the drought hangover in both the U.S. and Canada last year, global grain supplies are growing tighter.

2022 Acreage Debate Heats Up 

Analysts argue each crop can’t afford to lose any acres this year, as the acreage debate in the U.S. will have its first official report next week. Ahead of the report, the range of acreage guesses is wide. But Elchinger says she doesn’t think there will be major shifts this year, despite the fertilizer and chemistry scenario playing out.

“I’m not in that camp,” she says. “You look at west of the Mississippi, we had a record anhydrous run last fall. So those acres are probably locked into corn, barring a Mother Nature situation changing that. I think we're probably close to that 91 million [acres] of corn,  89 million beans, potentially a little bit more corn, depending on how many we can pull from cotton.”

Read more: Compare and Contrast: Acreage Predictions Roll In

Secretary Sonny Perdue, who served as U.S. Secretary of Agriculture from 2017 to January 2021, points out  USDA's upcoming report is what farmers intend to plant, and ultimately, farmers have the final say. 

“While I was at USDA, I found while USDA had the numbers, farmers kind of already know. They are the best determinant of what they plant, when and how,” says Perdue. “They'll make the determination. The USDA is just reporting what farmers have already predetermined they're going to do. So while we are in a crunch regarding supply right now, I am so amazed in our farmers having an infinite capacity to get back up to supply-demand situations. And unfortunately, lower prices at same time.”

Possible Surprises? 

Perdue now resides in Georgia, and he says farmers in Georgia compete for cotton or peanut acres. Between 2008-2009, he says many farmers in the Mid-South sold their cotton equipment and bought grain headers due to low cotton prices. Although cotton futures hit the highest point since 2011 this week, he thinks the market will see a balance.

“I believe Bailey’s numbers,” says Perdue. “You're going to see some balance between beans and corn, or cotton and peanuts in areas. You're probably going to see those farmers continue to stay with those crops. We don't do enough feed grains in that part of the world to really matter on the overall supply demand.”

So, what could the big acreage surprises be next week in USDA’s report?

“Potentially throwing out a much larger corn acre number,” says Elchinger. “Do they come out with 93 or 94 million? Do they drop that bean acre number based on $6 corn futures? I tend to agree, nothing would surprise me in 2022.”