High prices can push 2021-22 US corn, soybean acreage above initial estimates

New York — US farmers are expected to plant on "every possible piece of soil available" as they aim to bank on record corn and soybean prices in the US, which has the potential to push planting intention estimates for US crops above the US Department of Agriculture's previous projections, various sources told S&P Global Platts.

The USDA in its February Outlook Forum estimated the area under corn to rise by 1.2 million acres from 2019-20 to 92 million acres in 2021-22 (September-August), while soybean is forecast at 90 million acres, up 6.9 million acres year on year.

The combined area for US corn and soybean of 182 million acres is already a record high, and sources expect the numbers to show slight growth in the upcoming Prospective Plantings report due March 31.

"Given the higher prices and higher crop insurance guarantees, the combined March Prospective Planting forecasts for the duo (soybean and corn) could be 2.1 million acres higher than the Forum estimates, with a reasonable probability that numbers could exceed even that," said Dale Durchholz, an US-based commodity analyst under the name Grain Cycles.

Acreage seen rising

Durchholz said he expects 2021-22 US corn acreage to be 92.8 million acres, and soybean at 91.3 million acres, both above the USDA's Forum estimates.

Sal Gilbertie, president of grain trading firm Teucrium, echoed that view. "I do think it is possible to exceed 182 million acres, perhaps by another 2 million acres or so. My guess is that with today's high grain prices, farmers will plant every possible piece of soil available."

"It would not surprise me to see 93 million acres of corn and 91 million acres of soybean planted in the US this season," Gilbertie said.

S&P Global Platts Analytics also sees the US corn acreage estimate 2 million acres higher than the USDA's Forum projections, at 93 million acres, while soybean acreage is forecast at the same level of 90 million acres.

Higher prices, insurance

US corn and soybean prices on the Chicago Board of Trade rose significantly throughout 2020 to reach multi-year highs. Prices continued to rise in the first three months of 2021.

The most-active May futures corn contract gained nearly 68% over the last year to touch eight-year highs. The contract is currently trading at $5.46/bu.

Soybean prices witnessed a sharper increase of 77% in the last year to trade at a six-and-a-half-year high and is currently trading at $14.14/bu.

However, analysts' expectations of higher planting intentions are likely to add to mounting pressure on corn and soybean prices. The USDA's annual ending stocks report also remains in the spotlight, since any major change in the key numbers will help set the tone in the markets for the coming weeks.

Adding to the price situation, higher insurance guarantees will also encourage farmers to go that extra mile in planting, sources said.

"The determination of the February crop insurance guarantees comes in the middle of these events and can have significant implications on the number of acres producers seed on any given year," Durchholz from Grain Cycles said.

"Suffice it to say, the highest corn spring insurance guarantee since 2014, and soybean insurance guarantees since 2013, should stimulate planting in 2021 -- weather permitting," he said.

Prevent planting acres

Over the last 15 years, prevent planting in the US has averaged 5.6 million acres. "A part of these acres is likely to get planted in 2021 with the higher prices and insurance guarantees," Durchholz said.

"Higher prices are an inducement to plant lower quality, abandoned land," he said. "We have already heard of pastures being ripped up in the Great Plains, with intentions of planting crops."

Forecasting the mix of US corn and soybean acres is a more challenging task this year, according to sources. A US-based farmer said 2021 is likely to witness a good battle for acres between corn and soybean.

In the US, corn and soybean are planted almost at the same time -- corn planting typically begins in April-May, with soybean planting in May-June.

Demand story

"One also must not forget the message producers are hearing; a message indicating Chinese demand is going to be robust the next few years to meet burgeoning demand and to rebuild depleted inventories," said Durchholz.

China's import demand estimates for corn and soybean in 2020-21 are forecast at record levels. The USDA expects China to import 24 million mt of corn in 2020-21, almost three times the 7.9 million mt it imported in 2019-20.

China's soybean demand is set to rise 13.4% year on year and exceed the 100 million mt mark as the country swiftly looks to rebuild its pig population.

According to industry experts, China's grain demand is likely to remain elevated in 2021, keeping grain prices buoyant.

US agricultural exports are forecast to rise in the 2021 financial year to a record $157 billion on strong demand from China, the USDA's chief economist Seth Meyer said during the February Outlook Forum.