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No 'Battle for Acres' Coming

TAGS: USDA Soybeans

The 2009 "battle for acres" may become more of a balancing act than a battle, says Frayne Olson, NDSU Extension crops marketing specialist.

On March 31, the USDA will release the first survey-based estimate of 2009 planting intentions. In the past several years, this report has signaled the start of a competition for acres, which leads to a strong price rally through spring planting, he says.

"This year's planting intentions report will be watched closely by the commodity market, but may not spark a sharp price rally. The combination of more typical carryover stocks, a weaker demand outlook and more acres available for corn and soybeans suggest that there will not need to be an aggressive bidding for acres this spring," he says.

Olson provides the following summary for each of these factors:

The current stocks-to-use ratios for wheat, corn and soybeans are near the long-term average. The stocks-to-use ratio can be thought of as a margin for error for grain usage in the current marketing year. This ratio has a strong relationship with the average market price. As the ratio decreases, average prices tend to increase. The current stock-to-use ratio for wheat is 29%, compared with a 15-year average of 26% and a 13% ratio in 2008. The current ratio for corn is 15%, compared with a 15-year average of 14% and a 12% ratio in 2008. The current soybean ratio is the tightest at 8 percent, compared with a 15-year average of 10% and a 7% ratio in 2008. This suggests there is a greater reserve available from last year's crop to cover any potential production problems for the upcoming growing season.

The U.S. and world economic recession has slowed both the domestic demand and export demand for all of the major crops grown in the U.S. The grain markets have a good estimate of the production that is available for use. However, the major unanswered question is what the current and future demand will be for these bushels. Who will be willing and able to purchase these bushels and at what price? USDA forecasts, as well as private industry price estimates, suggests that demand for the 2009 crop will be weaker than it was for the 2008 crop.

The Feb. 10 winter wheat report indicated that U.S. plantings were approximately 42 million acres, compared with 46 million acres in 2008. There was an approximately 1 million-acre reduction in hard red winter wheat plantings and an approximately 3 million-acre reduction in soft red winter wheat plantings. The majority of these acres will be available for planting into corn and soybeans in 2009.

"These conditions also suggest that if there is a strong price rally this spring, it probably will come from a concern about production rather than an attempt to meet an expanding demand base," Olson says. "The existing dry conditions in Texas, Oklahoma and southwestern Kansas are areas of concern. If these conditions persist or expand, there may be an attempt to buy more spring wheat acres in the northern Plains. A spring price rally should be used to catch up on old crop sales and lock in a portion of the 2009 production."

Source: NDSU Extension Communications

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