US farmers will end up planting more soybeans than surprise data suggested, brokers said, highlighting the potential for farmers to find extra land, and for the oilseed to lure more land away from rival corn.
The US Department of Agriculture on Tuesday surprised investors - and helped soybean futures avoid the tumble seen in corn and wheat – by estimating domestic sowings of the oilseed this year at 84.64m acres.
While up some 1.1m acres from an initial forecast made in February, and 900,000 acres above last year's record high, the figure came in well short of market expectations of plantings of more than 85.9m acres.
However, the USDA data, drawn from a survey of farmers on their sowings intentions, does not represent the last word on US crop area this year – and many brokers are holding with expectations that actual soybean plantings will set a record by an even higher margin.
Some observers have highlighted the recovery in the price ratio between November soybean futures and December corn, which is regarded as a crude measure of the financial appeal of both crops.
A figure of about 2.25 is considered by many observers as neutral, with a higher figure encouraging farmers to prefer the oilseed to the grain in their planting programmes.
"The November soybean/December corn ratio popped to 2.35 after the USDA report from 2.27 on Tuesday," Terry Reilly at Futures International said.
"Tuesday's market action will certainly encourage more soybean acreage," said Darrell Holaday at Country Futures.
The rise in the ratio, which stood at 2.40 in late deals on Wednesday, signalled a "better return for soybeans than for 'corn-on-corn' acreage," said Chris Narayanan at Societe Generale.
"Any… significant soybean price rally, could change the final mix of acreage," he said, highlighting the role of weather delays to plantings in boosting soybean area too, with the oilseed having a later seeding window than corn, its main rival for spring sowings acreage.
"Any continuation" of the wet weather which has slowed corn plantings in the early-sowing Mississippi Delta states "could help shift corn acreage to soybean acreage", Mr Narayanan said.
Furthermore, extra area might become available for planting, with some brokers sceptical of a USDA finding that overall acres of crops planted will decline as forecast from last year, which was a difficult year for sowings, meaning many farmers were forced to leave some land fallow.
At broker Country Futures, Darrell Holaday said: "The USDA is already 2m acres of crop ground below the same final number a year ago. We feel they will eventually find the 2m acres and possibly more.
"We feel a significant number of those will end up in soybeans pushing the final soybean acreage number over 85.5m acres."
Rabobank focused on a drop of 3.5m acres to 238.8m acres in the area that the USDA sees farmers planting with the four main row crops, saying that "decline of this magnitude seems fairly high.
"There is potential for farmers to plant more acres… Record soy acreage [is] still not high enough."
Extra soybean acres would imply richer supplies and pressure on prices.
However, at RJ O'Brien, Richard Feltes held some succour for soybean bulls, noting that, historically, US farmers have actually tended to plant fewer acres with soybeans than March USDA planting reports have suggested.
"It is interesting to note that March-to-final soy area has declined in eight of last 11 years," he said - while highlighting that last year saw a 2.1m-acre gain "on the heels of rising spring prices and a slow start to corn planting".
Still, investors who turned to history ahead of Tuesday's acreage data would have been rewarded for their efforts.
The report "marks the seventh year in the last nine when USDA March soybean area has fallen short of trade expectations", Mr Feltes said.
By Mike Verdin