April 30, 2020

Ag This Week - Corn Acres Slip

BAYN GR, CF, CTVA, MOS, NTR, NTR CN
By Kathy Kent
Some U.S. growers are switching acreage from corn to soybeans and other crops following ethanol production cuts, USDA estimates for a big corn crop and expectations for lower feed demand yy.
  • 9 of 18 ag dealers lowered corn acre estimates slightly since late 1Q20; 2020 corn acres expected flat-up 3% yy (vs. up 3%-6% yy in late March/early April)
  • Corn seed prices still expected flat yy, soybean prices down yy, in line with estimates from OTR Global’s March Seed and Crop Protection report; fertilizer demand trends remain solid

Prices Cause Farmers to Switch Some Acres Away from Corn
Some U.S. farmers are re-evaluating their planting intentions, even at the final hour of going into the field, according to U.S. seed, crop protection and fertilizer dealers. They said farmers were reacting to the steep decline in commodity prices -- especially for corn -- caused by drop in ethanol production, expectations for lower feed demand yy and USDA estimates for a large 2020 crop.

A Midwest seed retailer said, “[Corn prices] have absolutely made a difference [in seed demand], without a doubt. We had pretty good and solid numbers up until six weeks ago. The industry was talking 96 million acres, and occasional 97 million, and now they are talking about 92-93 million acres. I’m shocked at how quickly it has changed.”

Nine of 18 dealers said farmers were moving some acres away from planting corn, lowering their planting estimates from OTR Global’s March 24 Seeds and Crop Protection report and April 9 Fertilizer report. The 18 dealers (all repeats) now expect corn acres to be flat-up 3% yy, compared with March/early April expectations of up 3%-6% yy. Eight sources said soybean acres would likely increase because of its relatively better profit outlook compared with corn. Traditionally, seed companies, like Corteva Inc. and Bayer AG, generate more revenue from corn seed sales than soybean seed sales.

Planted Acre Revisions vs. OTR Global’s Fertilizer/Seeds and Crop Protection Reports (number of sources)
 CornSoybeans
Increased estimate-8
Maintained estimate98
Lowered estimate9-

 

Dealers’ YY Planted Acre Estimates
(number of sources)
 CornSoybeans
 March 24/April 9CurrentMarch 24/April 9Current
Up 21%-25%1†---
Up 16%-20%---1
Up 11%-15%1--1
Up 6%-10%5421
Up 1%-5%8717
Flat2285
Down 1%-5%143-
Down 6%-10%--32
Down 41%-50%-1†--
Don’t know--11
Average*Up 3%-6%Flat-up 3% Flat Up 1%-4%
*Straight averages based on sources’ responses in this report vs. what they expected in OTR Global’s March 24 Seeds & Crop Protection and April 9 Fertilizer reports.†Outlier excluded from averages

Sources who did not anticipate a change from earlier estimates said farmers were unlikely to alter their plans because they are on the cusp of planting, with inputs already in place. Sources said spring weather in many regions has allowed for the completion of fieldwork, like nitrogen applications, paving the way for corn planting. A multistate Midwest fertilizer dealer said, “We have not seen evidence of switching, although we keep hearing the justification behind it. There were a few grain [traders] speculating that corn [acres] could be at the high end of estimates because of how fast it is [being planted] without [bad] weather.”

Seed Pricing: Most dealers said the shift away from corn has not changed seed pricing trends (In OTR Global’s March report, corn seed prices were flat yy and soybean seed prices were down 7%-8% yy). A Midwest seed dealer said, “I don’t see any pricing influence on these late-season changes. No one shops for pricing when the planters are in the field. It is mostly, ‘when can I get it?’” Another Midwest seed dealer said, “My opinion on seed prices has not changed at this point. I think our [Bayer] Xtend number will increase because we are planting soybeans early and growers will have more opportunities to make [post-emerge herbicide] applications of dicamba on their soybeans.”        

All five fertilizer dealers said their demand trends remain on target for 2020, despite some marginal crop changes. OTR Global will follow up on seed and fertilizer markets in its spring research.

Additional Quotes
On Acres

“Our corn sales have gone down thousands of bags in the last two weeks. Most are switching to soybeans, but we are seeing more peas, rye, wheat and other crops. For the last few weeks, I’ve been saying 87-92 million acres of corn instead of 97 million, but we’ll see. My current guess would be 92 million acres of corn in the U.S. in 2020.” Midwest seed and crop protection dealer

“I’m going to stick to my estimate from March. We are having an excellent April run. We are hitting record volumes for nitrogen, which is telling me growers are planting more corn. Everyone is aware of the market and talking about it, but most are sticking with the initial plan.” Midwest seed dealer

“I think we may be closer to 92.5 million acres corn before we are all done, up just 3%. Soybean number could be up 12% to 85.5 million acres. I think soybeans are picking up a few cotton and wheat acres also.” Midwest seed dealer  

“I talked to a grower this morning who hadn’t planted yet. He’d been planning to move from 50% corn acres to 75%, but he’s decided to keep it at 50/50 rotation. So there’s another 500 acres less corn. We have five ethanol plants in this region and two shut down and three are operating at 40% capacity. The growers have corn stored and they don’t know where they’re going to sell it. That’s what’s causing them to switch.” Midwest seed dealer    

“The competition [for corn] isn’t with other crops, it is with preventive planting. For most farmers, taking preventive planting on their crop insurance is currently a better financial option than actually planting corn…If we get much wet weather across the region, corn acres could drop 20%. On the other hand, if we stay drier than normal, it will be difficult for many farmers to argue that they couldn’t plant.” Midwest seed dealer

“A lot of the guys aren’t saying exactly what they’re doing right now because they’re so busy; they just show up say give me another 100 units of soybeans.” Midwest seed dealer

“Chances are [corn] will shift to soybeans due to input costs. It costs a lot less to produce an acre of soybeans than an acre of corn -- from seed costs to fertilizer to the energy needed for drying the corn.” Midwest seed dealer

“We are hearing a little -- key word little -- bit of corn acres going to bean acres. We are not seeing any impact on fertilizer sales so far. The good farmers should have a lot of work done already, tillage, chemicals, fertilizer, etc., with seed on site. The guys waiting till [the] last minute to decide most likely are the farmers that are probably broke and can’t pay their bills.” Midwest fertilizer dealer        

“We haven’t noticed much of a change in acres from when we spoke. Our seed bags still show more corn and our spring nitrogen sales appear to show the same thing.” Midwest seed dealer

“April’s been strong, seeing unprecedented demand in some areas. I think it’s due to growers afraid of what tomorrow may bring so they’re thinking let’s get it done today. Corn acres feel like they’re up, and I’d stay with my earlier 2%-4%. Soybeans will probably be up some, maybe 3%-4%, and those acres are shifting away from cotton. With low commodity prices, no ethanol demand, and everything else, who knows where we’re headed.” Southern fertilizer dealer

Seed
“We had a couple guys ask about going to a cheaper hybrid. Does a grower buy older genetics, lowering their initial input costs, but potentially exposing themselves to an agronomic issue or lower yields? Some of those decisions are happening now.” Midwest seed dealer

“I don’t see a change in prices or market share affected by this, but [Corteva’s] Enlist is not going to hit the [penetration] I thought earlier.” Southern seed dealer         

“We are also getting some farmers that had bought XtendFlex soybeans switch to Enlist. They are worried the current situation could delay the EU import approval. They say they can’t take the risk if it doesn’t get approval by the time combines roll.” Midwest seed dealer

Fertilizer
“Logistics haven’t been able to keep up with demand the past couple of weeks on the Ohio River. [We have] seen some logistical-based price increases as a result.” Southern fertilizer dealer   

“Ammonia [usage] has been strong, and it is replacing some other nitrogen types due to economics and the weather window was there to do [apply it].” Midwest fertilizer dealer

Ag This Week highlights conversations and opinions of agriculture industry supply chain sources that occur during the week, while OTR Global is developing full research reports. The quotes and editorial opinions on market issues in Ag This Week focus on the industry’s weekly developments and may also be consolidated in OTR Global’s full research reports as they are released quarterly.