US soybean sowings may set a record by an even bigger margin than has been expected thanks to the disadvantage heaped on rival corn by high fertilizer costs and a slow start to the spring planting season.
The US Department of Agriculture stunned the market in March by, in a much-anticipated briefing on US farmers’ spring planting intentions, revealing that growers were planning a record 91.0m hectares of soybeans – well ahead of the 88.8m-acre figure that investors had expected, according to a Dow Jones poll.
Soy area was also above the 89.5m acres farmers intended to allocate to corn – a number which investors had expected to come in at 92.0m acres.
Corn’s unexpected unpopularity was viewed as spurring an outperformance in futures, in a quest to improve its financial appeal to farmers and win back acreage.
The ratio of new crop November soybean futures to December corn futures tumbled from 2.24 ahead of the briefing to 2.08 afterwards, easing further to 2.02 by the close of April.
Despite this price incentive, US farmers may have increased their soybean sowing intentions further since the report was published, rather than switching back to corn, said Darren Cooper, senior economist at the International Grains Council.
“We could see those acres flowing into soybeans even greater than was forecast in the Prospective Plantings report,” Mr Cooper told the IGC conference in London.
With the relative price shift to corn, “the market suggests that is illogical”.
However, corn may have proven even more disadvantaged than thought by its higher growing costs, compared with soybeans which fix nitrogen from the atmosphere.
“Because of the elevated costs, elevated fertilizer values etc, etc, some of that acreage could shift from corn to soybeans in the US,” Mr Cooper said, seeing the potential for a similar trend later in the year when South American growers plant 2022-23 corn and soybean crops.
Scott Gerlt, economist at the American Soybean Association, also flagged the potential for extra soybean acres, citing the late start to the US spring sowings season, because of cold and wet Corn Belt weather.
Corn has a slightly earlier seeding window than soybeans, meaning that delayed plantings can prompt farmers to switch acreage from the grain to the oilseed.
The market had “tried to bid back corn acres through price ratios,” he said, noting that “you could pay for some those corn costs” through the outperformance of futures.
“But given the planting delays we have had in the US for corn, that could push some more acres to soy.”
US growers were as late as May 22 more than 20m acres behind in corn plantings, compared with five-year average levels, USDA data show.
The comments come ahead of revised US acreage figures which the USDA is poised to release at the end of this month.
Mr Cooper added that growing US crushing capacity, which is being incentivised by the boost to soyoil demand from the burgeoning advanced biodiesel sector, coupled with increased forward export orders for 2022-23 meant that the “US needs a bigger crop this year.
“US export commitments are at 12m-13m tonnes, a 60% increase year on year,” he said, noting that “China has been forward contracting huge volumes”.
USDA data show that China had, as of May 26, ordered 7.31m tonnes of US soybeans for 2022-23, up from a comparable figure of 3.09m tonnes a year before.
‘Needs a big crop’
“With what is happening domestically, and with the export programme, the US needs a big crop,” Mr Cooper said.
Even the record 126m-tonne US soybean harvest expected by the USDA “would not allow much in terms of inventory rebuilding. We would need a crop north of 130m tonnes.
“We really do need a big crop this year, otherwise we will have to get use to the market [price] level where we are at the moment, or even higher.”