March 30, 2009

Soy acreage is expected to rise in Tuesday's US Department of Agriculture plantings report, but seed-sale trends in the Corn Belt point to still-strong interest in corn.

 

Global economic malaise weakened the demand outlook for corn and many analysts favour greater soy in light of the lower input costs associated with planting the legume. But this doesn't necessarily square with sales trends in the Corn Belt at this point in the season.

 

Still, industry analysts warn that some farmers are double booking both corn and soy and some farmers are still sitting on the fence waiting to see how the variables of weather, crop price, market outlook and input costs shape up as planting season progresses.

 

"I'd expected to see more beans when I came this season, but [sales are] down further than I expected," said Bill Rover of Epley Bros. Hybrids in Shell Rock, Iowa, in the northeastern part of the state.

 

Rover estimated corn accounted for about two-thirds of his sales this spring season, which is about 90 percent done.

 

Still, he added, pricing is an issue and he noted some farmers who hadn't yet made their commitments were responsive to recent specials he advertised in local newspapers.

 

The market will receive its first official snapshot of the year's crop mix when the USDA releases its prospective plantings report at 8:30 a.m. EDT Tuesday. The USDA's grain stocks report, to be released at the same time, also will help shape planting sentiment as it provides a sense of demand strength over the past quarter and what supply is available moving forward.

 

On average, analysts surveyed by Dow Jones Newswires predict the plantings report will reflect a drop in corn acreage, to 84.548 million from 85.982 million planted in 2008. Still, analysts on the high end of the range of 17 analysts see corn acres jumping to 89 million acres.

 

In contrast, soy acreage is expected to jump to 79.251 million acres from the 75.718 million planted last year. None of the analysts surveyed anticipate a year-over-year drop.

 

"Our sales are up in both corn and soy and we think we've seen a market-share increase in both," said Pat Arthur, a spokesman for Pioneer Hybrid. "We know when the USDA numbers come out we'll see some farmers make a final decision."

 

Monsanto Co. (Mon) couldn't provide sales details ahead of its April 2 second-quarter earnings report, but Monsanto spokesman Lee Quarles said the trends the company expected to see favouring greater soy acreage appear to be on track.

 

Several seed dealers acknowledged that some farmers will book corn and soybean purchases and then negotiate to return one of the two when they begin planting. But the trend tends to increase in years when farmers face a seed supply crunch and that aren't a problem this season, Arthur said.

 

"Overall, there's been a slight shift to more soy on the market," said David Fister, chief executive of Pfister Hybrid Corn Co. in El Paso, Ill. But, he added, "I think later in the spring it's maybe trended back toward corn - seeing a little more interest now in corn."

 

Where the Corn Belt fades into the Great Plains, it seems wheat's loss may be corn's gain.

 

"We're seeing some tendencies from early seed sales and from some ammonia nitrate that's gone out that farmers in a lot of our areas may be increasing some corn acres, not cutting back," said Roger Caffey of MFA Inc., which services Missouri and bits of connecting states including Iowa, Kansas and Arkansas.

 

He added that wheat acreage around Kansas City has slipped to about two-thirds of its average levels and his sales manager from the region noted a definite increase in corn acreage.

 

"Something's got to be done with that ground," he said.

 

In the past couple of years, farmers faced strong market incentive to plant corn, but such incentive isn't evident this year, said Greg Wagner, senior commodity analyst at AgResource Co.

 

"The battle for acres, per se, lacks the bare knuckles veracity that characterized the last couple years," Wagner said. "There's a strong tendency for producers to get back to a more regular rotation."

 

Wagner acknowledged an emotional preference of corn-belt farmers to plant corn. But, he added, "this is a very unemotional market."