The March 31st USDA Prospective Plantings report rocked the soybean complex.  The USDA boosted soybean acres 18% from 63.7 million last year to 74.8 million acres and cut corn 8% down to 86 million acres from 93 million last year.

The March report is like the NBA or NHL trading deadline.  In Canada sports networks actually set aside there whole network on the day the NHL has its late season trading deadline.  Leaf nation, that moribund group of ancient fans who actually follow the blue and white anxiously sit by their TV.  Ditto for the end of March USDA report.  At elevators across North America, many farmers watched DTN monitors to get the results.

I’m aware of all the critics of these reports.  If you’ve read DTN senior analyst Darin Newsom’s thoughts on these reports you’ll know he thinks they provide comic relief.  I believe he’s right with this thought, however sometimes the hype is so strong (like 2007) explosive price movement immediately follows these reports.  Soybeans were already experiencing a downturn going into the report.  So the limit move down was like piling on in football.

Of course we are still a long way from payday.  This was simply a snapshot in time, a survey of producers the first week of March when soybean futures were over $15.  Corn prices didn’t even flinch on the report, partly because it was bullish for corn and partly because we know the legislated renewable fuel standards demand needs to be met.  At the present time on my farm I should be planting more corn and less soybeans.  I’d say this is the same for Iowa, Illinois and Indiana.  How that will pan out as we move toward the actual planted numbers will be the true litmus test.

Some of you might be thinking, “Phil, you’re just an “April fool” because you didn’t have your pawns in a row going into such an important report.  However, I like to remind everybody whom either listens or reads this that nobody knows what the market will do.  If they think they know just tell them to wait a little while.  Eventually the market will make them look like an idiot.

It is one think to muse about the supply and demand, non-speculative versus speculative, commercial carry versus the phases of the moon.  It is another thing to sift through the outside influences of the market currently going on in the American financial system.  I watched US Federal Reserve chairman Ben Bernanke closely last Wednesday morning as he testified before Congress.  At one point he was asked if the Federal Reserve could be more innovative in its monetary policy moves to help the US economy. He simply smiled into the camera and said something to the extent that he thought “they” at the Federal Reserve had pulled more than one rabbit out of the hat.

It was a seminal moment for me.  One, as an agricultural economist who was schooled in the dismal science, I find his job pulling the levers on the economy fascinating.  Two, what’s going on in the US economy now is unprecedented in my lifetime and the solution to it is proving illusive.  Seeing Bernanke squirm, even the slightest bit was truly fascinating.

Of course the greater picture from my perspective is bringing the message to farmers and agribusiness is how it affects them.  At the present time in the post Bear Stearns bailout “era”, credit and liquidity problems in the US economy will surely weigh in on grain markets.  I’d be surprised going ahead if we don’t see another raised flight of capital leaving the commodity markets at some point into 2008 or early 2009.

You might remember my boat analogy of a few weeks ago.  Well, as of the first week in April, everybody is still rowing like crazy to get to shore.  I believe Mr. Bernanke and the US Federal Reserve will cut interest rates again, throwing those rowers a few more power bars.  That will cause the US dollar to continue in its doldrums and it also will increase liquidity in the market.  It also should ensure that our pinstriped pirates within some punk hedge fund have enough nickels to buy corn and soybeans.

Of course there is the other hand which says Bernanke misses the call, inflation rears its ugly head, massive unemployment results, the US dollar climbs and ultimately a big drop in food demand, causing even more angst in commodity markets.  Of course we’re not there yet, with December 2008 corn futures breaking through $6.  So I don’t think anybody’s predicting doom in the nation’s cornfields.

Tellingly, Bernanke had to answer several questions from congressmen regarding their constituent’s ability to pay for “rising food costs.”  I’ve said it before; this “high food cost” issue is getting traction in our greater society.  Let that be a cautionary note. However, with tractors set to roar within the next few weeks, the profit path in the grain and oilseed complex seems to be wide open.