Those listening to the markets every day know there is a big difference between the number of acres the trade thinks will be planted to soybeans and the number of acres USDA is so far projecting. These aren’t as far apart as you might think and there may even be some positive wiggle room in them.
The trade has long thought U.S. farmers will plant about 86 million acres of soybeans. USDA thinks they’ll plant 83 and half million. Because USDA is using a much bigger national average yield the total number of soybeans raised is only about 56 million bushels apart…both in the 3.8 billion bushel range. USDA thinks that means the cash price of soybeans paid to farmers next year will average about nine bucks. University of Illinois Ag Economist John Newton has a brighter outlook.
Quote Summary - The big picture supply and demand fundamentals for next year, with production increasing and supply building naturally points to lower prices. USDA has pegged the soybean marketing year average price at $9 per bushel. This is a dollar and twenty cents below this year’s projections under similar conditions. There is opportunity, then, for the price to come up from there.
This opportunity lies in the soybean export market which is already on pace to set a record for this year and projected by USDA to be even better next year.
Quote Summary - So where is the potential for prices. Well, USDA has lower planted acreage of soybeans, but a pretty high yield. If yield is closer to U of I’s calculated trend of 44.3 bushels to the acre going back to 1960, then there would be a lower total production of soybeans with strong consumption. Stocks could be reduced, however highly unlikely, and we could see positive price pressure.
Farmers will add their take on how many acres of soybeans will be planted in the Prospective Plantings report to be released March 31st. USDA is now surveying them.
Farmers throughout the nation are deciding which of the new farm programs to take. Another piece of that puzzle was put into place when USDA released the county wide corn and soybean yields late last month. These can be used to estimate some of the 2014 farm program payments.
County wide yields as calculated by USDA's National Agricultural Statistics Service along with the estimated season's average cash price - the marketing year average - can be used to forward figure 2014 ARC County payments. It is possible therefore to know a lot, if not everything, about the first potential crop year farm program payments before any farmer ever signs up for the safety net says University of Illinois Ag Economist Gary Schnitkey.
ARC County makes payments to farmers when revenue falls below a bench mark. It is calculated using county wide yields and a marketing year average price. Both are available and can be used to make estimates. The Marketing Year Average price won't be finalized until the fall. It is projected, however, each month in USDA's World Agricultural Supply and Demand Estimates report (WASDE).
The mid-point for corn is $3.65, but this could vary up or down. Using the county yields, it is possible to project fairly large ARC County corn payments for farms from New York and Ohio through Indiana, northern Illinois, Michigan, Wisconsin, Minnesota, Iowa and into the Dakota's.
Some of these areas may even receive the maximum payment from ARC County.
Other areas may not get a 2014 ARC County payment for corn. These include central and southern Illinois, parts of Missouri, eastern Kansas and southern Indiana. Only a few counties around the nation will receive an ARC County soybean payment.
These are found in Iowa, Wisconsin, eastern Ohio, and New York. Does it change anything as it relates to the ARC County vs PLC farm program decision? Not likely, but the only way to really tell is to run the numbers. That can be done using the online Farm Bill Toolbox and USDA's APAS website.
You may read Gary Schnitkey's article about 2014 ARC County and PLC payments online.