FORT COLLINS, Colo. (Reuters) - With February trading complete, the U.S. government’s insurance guarantees to farmers for the 2020 corn, soybean, and spring wheat harvests have reached four-year lows. Additionally, corn is favored relative to soybeans by the largest degree since 2016, but the yellow grain may not be the clear-cut winner.
February’s average price of new-crop (December) corn futures on the Chicago Board of Trade was $3.88 per bushel, some 12 cents below last year and slightly above the February 2016 average of $3.86. November soybeans averaged $9.17 per bushel last month, down 37 cents on the year but safely above 2016’s $8.85.
U.S. farmers plant much fewer spring wheat acres than corn and soybeans, but the insurance guarantees are particularly important for states like North Dakota, where half the total spring wheat acreage is planted. September Minneapolis futures averaged $5.77 per bushel last month, down 21 cents from last year but above the $5.13 mean from February 2016.
While those prices do not directly determine what U.S. farmers will plant each spring, they reflect a level of assumed risk to plant each crop in the upcoming growing season as they are used by the U.S. Department of Agriculture’s Risk Management Agency (RMA) in its revenue protection program.
The February prices do not offer a clear bias toward corn or soybeans in relative profitability, but it leans more toward corn than in the past three years. The February price ratio of soybeans to corn was 2.36, down from 2.39 last year, and the lowest since 2.29 in 2016.
Ratio values above 2.5 favor soybeans and those below 2.3 favor corn, especially in “fringe” areas where planting rotations are less important to producers, and values in the middle are more of a gray area. The ratio finished above 2.4 in the last two trading days of February, however, leaning a bit more toward soybeans.
USDA last month tentatively slated U.S. corn and soybean acres at 94 million and 85 million, respectively, up from 89.7 million and 76.1 million a year earlier. That would be the largest planted corn area since 2016, which was also 94 million acres. Soybean acres were 83.5 million in 2016, and that was a record at the time.
Another parallel to 2016 is that corn and soy acres rebounded from a relatively large area that was prevented from planting in the previous year. Some 4.6 million corn and soybean acres were prevented from planting in 2015, but 2019 comfortably set the record with nearly 16 million acres.
There are a few wild cards heading into the U.S. planting season that could influence the acreage mix and the timing. For one, soils across the Corn Belt are still very wet, especially in the northern areas. Extremely wet conditions combined with a lot of rain last spring caused record delays in corn and soybean planting.
Soybeans are typically sown right after corn as the optimal planting timeframe for the latter is more precarious. But about one-third of last year’s corn crop was planted in June, which is not historically preferable since pollination will then occur in hotter weather. Some 40% of the soybeans were planted after June 9 compared with a recent average of 12%.
Corn and soybean yields took a distinct hit last year due to the late planting, but the losses were likely nowhere near as bad as many producers and market analysts had feared. Some farmers had surprisingly good results too, so it is uncertain how last year’s lessons in late planting may influence this year’s timeline should wet conditions linger or worsen.
There is still time, though. U.S. corn planting does not start in earnest until late April and typically wraps by the first week of June. Soybean planting is heaviest during May and the first half of June.
Farmers are also unsure if they will get trade aid payments from the U.S. government for the 2020 harvest. They were not originally expecting that money, but President Donald Trump tweeted late last month that his administration would be prepared to offer assistance if the recent trade deals take longer than expected to ‘kick in.’
Last year, those payments likely played a huge role in some farmers pushing planting beyond their comfort levels due to a fear of unplanted acres being ineligible for the money. It is unclear how or if trade payments would affect farmers’ actions this year now that the possibility has been floated.
The opinions expressed here are those of the author, a market analyst for Reuters.
Reporting by Karen Braun; Editing by Peter Cooney