Planting Intentions Report
Shows Grains Off, Beans Up

Markets reacted sharply to USDA'S initial U.S. planting intention report, released on March 30, indicating plans to plant less corn and wheat, more sorghum and soybeans and slightly more cotton.

Futures prices initially moved up sharply on the report release date, but collapsed by mid-morning, based primarily on reports that some hogs in North Carolina were being tested for foot and mouth disease. The market was placing a heavy negative risk premium on the report of a possible foot and mouth disease outbreak in the U.S. Foot and mouth disease has been confirmed in England, Ireland, France, and the Netherlands, and about one-half dozen other countries have reported livestock showing symptoms.

If the diagnosis in the U.S. had proven correct, large livestock liquidations would have been expected, which would have reduced feed demand. As it turned out, the tests showed no foot and mouth disease and markets for livestock, wheat, soybeans and feedgrains made a slight upturn on Monday, April 2, while the market for cotton remained relatively flat to slightly negative.

USDA's initial planting intentions report indicated that farmers will plant 76.7 million acres of corn this year, down 2.9 million acres (3.6 percent) from 79.545 million acres planted last year and down 693,000 acres (.9 percent) from 77.386 million acres planted in 1999 when corn prices were higher. In addition, farmers indicated that they intend to plant two percent more sorghum, three percent more soybeans and less than one percent more cotton.

While corn planting intentions were lower and soybean intentions higher than the market had anticipated, USDA's report did not provide major surprises. The recent slight market rally is probably attributable to a greater shift in plantings than the market had anticipated. The market, however, is probably being held back by the world's livestock situation as it relates to foot and mouth disease and USDA’s corn stocks report, also released on March 30, showing corn and soybean stocks up eight percent and one percent, respectively, and wheat stocks down five percent, from a year ago at this same time.

Except for cotton, the reports overall were neutral to positive for prices.

According to USDA's initial March 30 report, corn growers intend to plant 76.693 million acres of corn for all purposes in 2001, down 3.6 percent from 2000 and down .9 percent from 1999. Expected acreage is down in almost all areas of the United States. Plantings are down throughout the Cornbelt, due mostly to the high cost of inputs and low price prospects. Farmers' intentions shifted away from corn in Texas and Louisiana as planting was hampered by frequent rains during the winter-spring land preparation and early planting season. Dry soils and lack of water reserves in the Southeast reduced intended corn plantings. The only region where farmers intend to plant more corn is the Northeast, where cool, wet weather last spring prevented many corn acres from being planted.

With 76.693 million acres of corn intended for planting, yields will be the swing factor for newcrop production and prices. While planting intentions indicated that 2.85 million fewer acres of corn will be planted, using a historical ratio of planted to harvest acres and if close to the trend yields of the past three years are achieved, corn production could approximate last year's levels, especially since moisture conditions are near ideal in the U.S. Cornbelt. We may end up with a market that closely approximates last year's market.

Add to this a lower livestock inventory, concerns about foot and mouth disease and eight percent higher stocks, and the market outlook will remain heavily dependent on whether the crop can be planted on time, given the cold, wet spring in the Cornbelt and weather throughout the growing season.

Corn plantings in Texas at 1.9 million acres are down 200,000 acres (2.6 percent) from 2.1 million acres planted last year and down 50,000 from 1.95 million acres planted in 1999.

U.S. sorghum plantings are expected to total 9.368 million acres, up 1.9 percent from 9.195 million acres planted last year to just slightly above the 9.288 million acres planted in 1999. Sorghum plantings in Texas at 2.9 million acres are down 100,000 acres from three million acres planted last year.

Not shown on the table but related to corn and wheat markets, soybean producers intend to plant 76.7 million acres in 2001, up three percent from last year. If realized, this will be the largest planted area for soybeans on record. Of the 31 soybean producing states, producers in 22 states intend to plant more acres this year, while producers in eight states intend to plant fewer acres than in 2000. Oklahoma is expecting no change from the previous year.

All wheat planted area is expected to total 60.3 million acres in 2001, down 3.6 percent from 62.5 million acres planted in 2000 and the lowest level since 1973.

Winter wheat at 41.336 million acres is down 4.6 percent from 43.348 million acres planted last year to the same level of 43.331 million acres planted in 1999.

Durum wheat acres at 3.46 million acres are down 12.1 percent from 3.937 million acres planted last year.

The 2001 other spring wheat planted acreage is estimated at 15.5 million acres, up 1.7 percent from last year.

As a result, corn and wheat acreage is down and soybean plantings are up. Market movement will be heavily dependent on weather and the results of the recent foot and mouth crisis.

All cotton plantings for 2001 are expected to total 15.614 million acres (15.394 million upland; 220,000 Pima), up .5 percent from 15.536 million acres planted last year and up five percent from 14.873 million acres planted in 1999. Farmers in Texas indicated a decrease of 400,000 acres planted to upland cotton this year to six million acres, down 6.7 percent from 6.4 million acres planted last year.

It appears that the cotton market has hit a snag. While plantings will probably be delayed as a result of the cold spring and the intended acreage number was lower than expected, estimates of domestic use and exports are also down. Moisture conditions are near ideal throughout the U.S. cotton belt. Assuming favorable weather, the 15.394 million acres of upland cotton could likely produce a crop of just under 19 million bales. That is well in excess of probable use and would add nearly one million bales to carry-out.

However, the fact that prices are already down to the lows since 1986 should allow some improvement. The market has not historically spent much time at this level. Cotton could rally quite a bit and still remain relatively cheap.

After last year's 24 percent reduction, USDA's March 31 planting intention report also indicated that farmers intend to reduce acres planted to genetically modified corn by an additional one percent.

After dropping by almost 50 percent last year, soybean and cotton growers indicated that they intend to plant 11 percent and three percent fewer acres of GMO soybeans and cotton, respectively.