Another Six Weeks of Winter to Guess 2023 US Crop Acres

This is the day that you don’t want to be called Phil.  As all of you know if you’ve watched any type of media today you’ve heard that Punxsutawney Phil saw his shadow which means that we will have another six weeks of winter.  Of course, it is almost unofficial within some commodity circles that Punxsutawney Phil’s prediction has something to do with the number of acres that are grown in the United States in the upcoming year. Some analysts think if Phil sees his shadow’s there will be more corn and some think if he sees his shadow there will be less corn acres. It all adds up to great fun.  if it was also easy.

Of course, with February here we can rely on the groundhog, but we also soon will get a better guess from the USDA with regard to upcoming acres to be planted in the United States in 2023. There have already been some musings from the USDA, and we should find out a little bit more at an outlook conference in the next few weeks. However, March 31st is the day where we will get the Prospective Plantings report from USDA. Oftentimes, that day can be very explosive for price action within the new crop market.

The early guesses are all over the place.  You can do a Google search or wander into the ChatGPT and you will find all kinds of numbers.  Last year the USDA predicted there would be 91 million acres of soybeans and 89.5 million acres of corn.  However, USDA earlier this month put that 2022 acreage at 88.6 million acres and soybeans way down to 87.5 million acres. So, who is right this year, the Groundhog or the USDA? Keep in mind the ground dog is great fun, but the USDA tends to adjust the numbers on production not only at the end of the year but in subsequent years to follow.

That’s why on one hand we shouldn’t get caught up with USDA reports and on the other hand we should realize the constant adjustment that takes place afterwards. Keep in mind, I’m not negating their importance because there is always a surprise within USDA reports which the algorithms do not have dialed in. Recently, over the last week or two we have seen new and old crop prices going up, but they have really been rangebound over the last couple of months. In many ways this is not giving incentive to either more corn or more soybeans.

Clues lie in the ratio between new crop soybeans and corn prices.  Our American friends will often use corn and soybean futures prices to figure this out. For instance, a ratio below 2.3 is usually supportive to more corn acres being planted, while soybean planting is favored with the ratio at 2.5 and above.  At the present time we are around 2.3 ratio which doesn’t favor either crop. I also plugged in a new crop Ontario corn price value of $7.26 versus new crop soybeans at $17.45 and came up with 2.3, meaning in Ontario there isn’t much incentive either way to grow corn or soybeans over each other.

Growing non-GMO soybeans with higher premiums might make it more favorable for you to grow soybeans in Ontario. However, sometimes there’s just an inherent bias that you might like growing corn more than soybeans.  For instance, hybrid corn is beautiful to grow. You plant in early spring, and it usually shoots out of the ground pretty good. You spray it and sometimes side dress nitrogen and the heat take over and the corn plant explodes in growth. It can be beautiful to watch.

Soybeans on the other hand at least on my farm are trouble all year. I have to plant them two or even three times, spray them every time I turn around and they look miserable at me all year. They are also the great liars, sometimes hiding their yield potential and sometimes not.  Corn on the other hand usually delivers me big yields, last year being the exception with no rain.  We also know as Ontario farmers as we look south our American friends prefer to grow corn, in fact they love it.  With that said, even with a soybean corn price ratio of 2.3, you’ve got to believe our American friends will grow more corn than they will soybeans this coming year.

What’s that mean for new crop prices going forward? Well, it sure hard to say at this point. A year ago, we had no war in Russia and Ukraine.  If 2022 taught us anything it showed how volatile prices can be.  Big US corn acres should mean lower prices, and lower soybean acres might not mean a thing especially with Brazil producing so many beans.

Mainly, it’ll be all up to the weather after this acres puzzle is answered.  Don’t necessarily believe the groundhog on a day like this.  My name is Phil and, on this day, sometimes people mix us up.