We’re only days away from April, and although it still feels a little winter-like in Chicago, planting season is upon us. Tomorrow, the USDA will release a crop report, forecasting how much Corn, Wheat, Soybeans, and so on will be planted in this fine country this time around. And the analysts are already out with their predictions on the forecasts. There’s a joke in there somewhere, ‘what do you call a prediction of a forecast…. wrong’. We’re not sure who these “analysts” are, but they’re predicting that the USDA will predict (you may have to read that twice) a larger planting season for one crop in particular… Soybeans.
“Analysts on average expect soybean acreage to rise 3% from last year to 85.9 million acres, while corn will fall 2% to 88.7 million acres, according to a survey by The Wall Street Journal.”
“Farmers are turning to soybeans for a few reasons: Prices have fallen less sharply than for corn, demand has been strong and producing the oilseeds costs less thanks to lower seed prices and less need for fertilizer.”
Farmers say the crop is better for business (at the moment), but there are downsides to these positions.
“But sowing more soybeans—used to make everything from animal feed to salad dressing—has its own downside. Many traders and investors are betting that further production increases will trigger steep declines in soybean futures, potentially pushing the $35 billion market to lows not seen since 2009.”
The question remains, that if more soybeans are in fact planted, could we see Soybean prices fall faster and deeper than what the markets experienced last year? Some analysts are predicting Soybeans to drop below $9 a bushel. Here’s the latest look at Soybeans by acres planted, front month contract prices, and net positions over the past 1.5 years.
(Disclaimer: Past performance is not necessarily indicative of future results)
There’s also a little of a ‘chicken or the egg’ debate here, because what happens if the USDA does come out and forecast record breaking acres planted in Soybeans, forcing prices lower, which in turn causes farmer’s not to plant it, thereby invalidating the ‘forecast’. Welcome to the exciting and often wrong world of predicting a forecast – we’ve touched before on how the USDA crop reports aren’t all that accurate (and here). And in today’s age of twitter, live updates to your phone, and folks like this doing a Pro Farmer Midwest Crop Tour, the USDA has to come up with a better way to accurately report crop data.
Meanwhile, Alternatives folks (specifically those who ply their trade in such Agriculture markets) don’t care all that much if Soybeans drop to $5 a bushel. They just care that the move from $9 to $5 is consistent enough to lock in the downward trend. We’ll see what happens tomorrow.