High prices not driving acreage

As reported in the weekly comments on Friday, the USDA last week released their acreage report for plantings of winter and summer crops.  Corn and Soybean Futures are at very strong levels.  Figure 1 shows the rally in corn, which started back in August, has seen prices at levels 62% higher than this time last year.

Compare this to wheat, which is higher than last year, but ‘just’ 19% stronger.  We can see in figure 1 that the gap between wheat and corn has narrowed significantly over the last six months.

Soybean futures, shown in figure 2, have also seen a very strong rally, with prices sitting 59% above this time last year.

The price rallies in US corn and soybeans over the last 12 months have been partly due to weaker supply, with demand playing a strong part. The global corn stocks-to-use ratio has fallen for five years in a row, while soybeans stocks-to-use has fallen heavily in the last two years, and helped push both soybean and corn prices higher.

Which such strong increases in corn and soybean prices over the last year, and with values at eight-year highs, surely grain producers in the US are planting more corn and soybeans? The acreage estimates, shown in figure 3, forecast only a marginal lift in corn plantings. Soybeans did see more of a reaction, with plantings growing by 4.5%

Despite price increases being more moderate, total wheat plantings are expected to lift 4.5%.  All of the increase in wheat acreage was for winter wheat however, which was planted back in November, before the full price movements had been realized.  Spring wheat plantings were down on last year, which makes sense given the current price spreads.