USDA's prospective planting report may miss coronavirus concerns, low returns on corn

The US Department of Agriculture's prospective planting report Tuesday may not reflect any impact of the slowdown in the US due to coronavirus concerns, or changes in corn to soybean price ratio, market participants said, as the USDA took samples at the end of February and beginning of March, prior to the events.

The Department of Agriculture has estimated area under corn and soybean in the 2020-21 marketing year (September-August) at 94 million acres and 85 million acres, up 5% and 12% on year, respectively. The average analyst estimates for Tuesday's prospective planting report replicate these numbers.

The corn to soybean price ratio climbed slightly, but is still below 2.4:1, so it continues to favor corn, said Pete Meyer, head of grains and oilseeds analytics at S&P Global Platts Analytics. Previously, the corn to soybean price ratio was at three-year low of 2.33:1.

Platts Analytics has estimated corn and soybean acreage in the US in 2020-21 at 93 million acres and 84.5 million acres, respectively.

The USDA's estimate of 94 million acres is toward the high end, said Steve Pitstick, a corn farmer based near Chicago.

"So much has changed since the March 1 sample time...crashed ethanol demand and increased soy prospects", said Pitstick. "Trade will not pay attention to whatever it [the report] says, in my opinion."

Ethanol prices in the US had fallen to historic lows. Low gasoline prices, and an expected fall in fuel consumption amid coronavirus concerns have all contributed to a cautious environment for ethanol demand.

Meyer said of the planting intentions report: "I don't know what to expect from the report since the survey was conducted in late February, before the country basically shut down."

To avoid the spread of coronavirus, governments across the globe have limited or shut down most non-essential travel and services, asking people to stay at home.

However, some analysts believe the pandemic might not lead to a major delay in planting.

"Coronavirus won't do much to delay farmers from planting," said Arlan Suderman, chief economist with INTL FCStone. "There might be local disruptions to distribution of seed and other inputs, but most of it should be in place."

Fertilizer could be a problem, but they would still plant and put fertilizer on later if that is the case, he said.

INTL has estimated corn acreage in the US this upcoming season at 93.69 million acres, and acreage under soybeans at 84.59 million acres.