U.S. corn plantings expected second-highest since World War II

U.S. farmers are expected to boost corn plantings this spring to the second-highest level since the end of World War II, though analysts say that probably won’t be enough to assuage the concern over tight supplies that’s kept prices for the grain above $6 a bushel most of the winter.

An estimated 91 million acres to 92 million acres will be seeded to corn in 2011, according to analysts and brokers surveyed ahead of the U.S. Department of Agriculture’s Prospective Plantings report March 31.

That projected range would be an increase of 3.2 percent to 4.3 percent from 88.2 million acres seeded to corn in 2010, and trail only 2007’s plantings, at 93.5 million acres, as the post-World-War II high. In 1944, farmers planted 95.5 million acres of corn, according to USDA data.

“We assume they’re going to plant fencerow-to-fencerow (to corn), and they should,” said Matt Maloney, a broker with R.J. O’Brien & Associates in the CME Group corn futures pit in Chicago. “But it doesn’t alleviate the concern” over strong demand and shrinking supplies.

Analysts, traders and investors will closely scrutinize the March 31 Prospective Plantings report, which is expected to signal market direction in coming months and provide a gauge on costs and supplies for livestock feeders and other grain buyers. The report is based on a survey of about 86,000 farm operators and is conducted during the first half of March.

“Huge” report, traders say

Interest in this year’s planting survey is particularly high, traders say, reflecting tight grain supplies, accelerating food inflation and large speculator positions in agricultural commodity markets.

“It’s a huge report,” said Maloney, who’s been working in Chicago’s grain futures pits for 20 years. “It’s the biggest in my memory.”

The USDA is scheduled to release the plantings report, along with its quarterly grain stocks estimates, at 7:30 a.m. Central time. Click here for last year’s Prospective Plantings report.

Soaring commodity prices are fueling a farm profit windfall, providing incentive to seed more ground to corn, as well as cotton, wheat and other crops. Soybean prices have also rallied but may lose acres this year, some analysts say, amid prospects that corn will remain above $6 a bushel into 2012.

Analysts’ estimates for this year’s soybean plantings ranged from 75.3 million acres to 78.5 million acres, compared with the 77.4 million acres planted in 2010.

“The margins are just so healthy now” for corn, said Jereme Pope, a Minneapolis-based risk manager with Slipka Trading. He works with farmers on hedging strategies. “Producers seem to be fairly optimistic on corn prices. Many are thinking that these prices will be here for a while.”

Farmers are “more optimistic about corn margins than beans due to persistent demand and corn stocks… that won’t likely be back to normal levels for a couple crop cycles,” said Pope.

Corn profits seen outpacing soybeans

Corn prices have nearly doubled since the middle of last year, based on CME futures, reflecting a disappointing U.S. harvest and rising demand from export markets and the ethanol industry.

In trading March 28, December corn futures, which reflect expectations for the 2011 crop, fell 12 ½ cents to $5.97 a bushel. On March 25, December futures touched $6.24, the contract’s highest price since August 2008. Futures for March, May and July 2012 ranged from $6.05 ¼ to $6.16 ¼.

In the Midwest, raising corn will be more profitable than raising soybeans this year, according to projections by University of Illinois economist Gary Schnitkey.

Corn in central Illinois will generate an estimated return of about $631 an acre above non-land costs, based on an average price of $5.85 a bushel and a yield of 195 bushels an acre, Schnitkey said in a March 25 report. By comparison, soybeans will return an estimated $442 an acre, based on an average price of $13.25 a bushel and yield of 56 bushels an acre.

Corn’s estimated return above soybeans, at about $189 an acre, would be nearly four times the average for 2004 through 2010, Schnitkey said.

An increase in corn plantings could lead to a record crop in excess of 13.7 billion bushels assuming favorable weather and an improvement in yields, according to a USDA forecast in February. Last year’s corn crop, at 12.45 billion bushels, was down almost 5 percent from the record 13.09 billion bushels harvested in 2009.

It’s all about the weather

But even with a perfect growing season, corn stockpiles, which are projected to reach a 15-year low later in 2011, probably will remain historically snug as global demand climbs, analysts say.

Earlier this month, Goldman Sachs Group analysts trimmed their forecast for corn prices later this year, but said weather risks likely will keep prices elevated. The New York-based firm recommended corn consumers take advantage of lower prices in coming months to lock in supplies.

“It would take very favorable weather conditions to push new-crop corn prices significantly lower” than projections, Goldman Sachs said in a March 20 report. “Any weather disappointment will curtail any inventory build and push corn prices above their recent highs to achieve demand destruction.”

Soon after the March 31 USDA reports, market focus will likely shift to spring and summer weather and its impact on crops, traders and analysts said.

“Much more important after Thursday will be what kind of weather conditions we get thrown at us the next six months,” Slipka Trading’s Pope said.

“Acreage numbers will quickly take a backseat unless there is a significant surprise,” Pope said. Weather is “a huge wild card this spring.”

(Source: http://www.dairyherd.com/dairy-news/latest/US-corn-plantings-expected-second-highest-since-World-War-II-118795834.html)