DM Monitoring
CHICAGO: Illinois farmer Fred Helms is so eager for his next soybean crop he invested in a faster-maturing variety of soy seeds in hopes of beating other farmers to harvest the crop in mid-September, more than a month earlier than usual.
Other U.S. farmers told Reuters they are signing contracts to sell the corn and soy crops they will harvest in autumn, months before they have even planted them, looking to take advantage of boom times after years of oversupply, trade wars and low prices. Some are waiting to sell, betting on even higher prices. A dozen farmers interviewed by Reuters said 2021 is shaping up to be their most profitable season in years as corn futures have rallied to their highest since June 2013 and soybean futures to their highest since June 2014. They are working to pay off debts and update machinery after years of sluggish markets left them dependent on government payouts.
Their fortunes have changed as food supplies tighten worldwide because of rising demand from China and as governments look to build stocks of food during the COVID-19 pandemic, spurring global food inflation.
Early forecasts seen by Reuters predict record or near-record combined acres of soybeans and corn, so Helms hopes he can earn a premium by delivering soybeans when supplies are still scarce.
“I think everybody is really enthused about the coming year opportunity,” Helms said. “There is going to be a big difference in income.”
The shift came quickly, with the U.S. Agriculture Department (USDA) forecasting a 73% drawdown in soybean stocks – the biggest year-on-year decline since 1963 – and a 19% drop in corn supplies – the biggest in a decade.
Now, souped-up demand for exports as well as domestic processing industries that make animal feed and biofuel means that for the first time in years, farmers are looking at high crop revenues.
Farmers like Helms are eyeing government estimates that point to U.S. stockpiles of the beans falling to a seven-year low by the end of the summer before the new harvest starts coming in. The ending stocks figure, a key measure of supply and demand, is reflected in the market price for a commodity.
Less than two years ago, when China had all but stopped buying U.S. crops during a trade war, soybean stocks stood at a record 909 million bushels. The latest USDA forecast calls for the stockpile to shrink to 140 million bushels.
China is back in the market in a big way. Though it fell short of its 2020 commitments under a Phase 1 trade agreement, its annual soy purchases rose 77% over 2019.
More recently, China made record purchases of U.S. corn, a product it has not traditionally bought, after its own crop was damaged by drought and pests.
Analytics firm IHS Markit Agribusiness projected U.S. plantings of corn and soybeans at a record 184.324 million acres (74.6 million hectares), eclipsing the previous record of 180.329 million set in 2017 and up 4.8% from 2020, according to a client note seen by Reuters.
Farmers already boosted winter wheat acreage for the first time in eight years due to the high prices.
Growers with some flexibility will likely spend the next month monitoring corn and soybean prices before deciding what to plant, said Matthew Wiegand, a risk management consultant and commodity broker at FuturesOne in Nebraska.
“We are at a level that doesn’t really swing acres one way or another right now,” Wiegand said.
The planned expansion is also good news for the makers of seed, fertilizer and equipment. Deere & Co forecast sales of agricultural equipment in the U.S. and Canada up 5%-10% in 2021.
Tim Dufault, who grows soybeans and spring wheat on 1,600 acres in Crookston, Minnesota, looks forward to picking up an upgraded tractor and seeder he recently purchased from the dealership, replacing a more than 25-year-old piece of machinery.
“The old one just was not doing the job anymore but I had been holding back for a couple of seasons,” Dufault said. “When this spring rolls around, let’s get the crop planted and see how much money we can make this year.”
Dufault booked contracts to sell between 10% and 20% of his expected 2021 wheat production and plans to lock in deals for a comparable amount of his soybean crop soon. ‘GOOD START’
Such early sales provide some certainty in a volatile industry. New-crop soybean prices are 25% higher than they were a year ago, trending at their highest point for early February since 2013. New-crop corn prices are at a seven-year high, up 15% from a year ago.
Nebraska farmer Craig Frenzen said he had already committed to sell 10% of his expected corn and soybean crops as futures prices surged past $5 a bushel for corn and $14 a bushel for soybeans. The University of Nebraska pegged the cost of production for corn in Nebraska between $3.01 and $4.51 a bushel and soybean production between $7.00 and $8.91 a bushel.
