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6m US acres 'lost' ahead of key sowing data

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Will investors discover the solution to the mystery of the missing acres?

The US Department of Agriculture is due later to reveal later that American farmers are on track to raise corn and soybean plantings this year, beating even the bumper 2009 sowings.

However, the estimates that analysts have come up with for what PFGBest's Tim Hannagan called the "mother of all supply-side reports" have left more than 6m acres - an area bigger than Belize or Israel - unaccounted for.

'Numbers look low'

Sure, analysts believe that America's corn plantings will increase by nearly 2.5m acres to 88.94m acres this year, with soybean sowings up a little over 1m acres to 78.55m acres, according to a Dow Jones poll.

"The issue with these numbers is that it only increases the total by 3.5m acres," Darrell Holaday at broker Country Futures said.

Given that wheat sowings are forecast to slide by more than 6m acres, thanks to the slump in winter wheat plantings revealed in January, "the numbers look low".

And that excludes the 2m acres idled last year, in part because of foul planting conditions, and a further 2m acres to so due to be freed up from conservation programmes.

Cotton factor

One missing ingredient looks to be cotton, which is likely to prove a far bigger draw in southern states thanks to a revival in prices to 80 cents a pound, their highest for two years.

Chicago wheat, meanwhile, stands at half its level of two years ago, and is within 10% of a three-year low.

"We would anticipate a 1m-acre increase in cotton acres, so that would make up some of the difference," Mr Holaday said.

Margin for error

However, investors will also have give some allowance for the difficulty of making estimates and, indeed, for the prospect of farmers yet changing their minds.

History shows that the USDA in March tends to overestimate final corn plantings by some 1.2m acres, and understate soybean acres.

And the department has admitted a history of overstating winter wheat area, while underplaying spring wheat and durum acres.

Allendale said the report was "typically the most volatile of the year as USDA often adds or subtracts 4m acres to the mix".

Price swings

Hence, indeed, why the briefing tends to be treated with such caution by the market, and has been bleeping on investors' radar since last month.

Mr Hannagan notes the experience of last year: "Everyone was looking for large increases in acres only to see soybean [plantings] up a fraction and corn acres lower.

"This pushed corn up the $0.30 [a bushel] limit with beans and wheat posting the sharpest daily gains of the year."

Solving the mystery of the missing acres offers more than intellectual reward.

By Mike Verdin

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