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US planting uncertainties cloud outlook for maize and soybean markets

07 Jun 2019

An abnormally wet spring has delayed plantings across much of the United States, and planting progress for maize and soybeans is at historically low levels. If these delays continue, global feed grain supplies could be significantly reduced in the upcoming marketing year. The delays will likely result in a shift of maize area into soybean production , further depressing US soybean prices that are already at eleven-year lows due to the ongoing trade spat with China.

According to the annual March survey of planting intentions, 37.6 million hectares were to be used for maize and 34.2 million hectares for soybean production. As of 2 June, US farmers had planted less than 67 percent of intended maize area (compared to 96 percent on this date last year) and only 39 percent of intended soybean area (compared to almost 86 percent last year). The next few weeks will be crucial for maize plantings as expected yields will decline the further the plantings (and harvest) get pushed back into the calendar year. Soybeans are typically planted later than maize, but their yields could be affected as well if plantings are delayed by several weeks.

US farm programmes are likely to have an impact on planting decisions as well. If insured under the federal crop insurance programme, producers may opt to receive a ‘prevented planting’ payment. Decisions whether to take a payment in lieu of planting a crop will need to be made in most of the major maize and soybean producing regions by the end of June. Analyses by extension agents and market advisors suggest that at current prices, the ‘prevented planting’ payments may be attractive for many producers.

The 2019 Market Facilitation Program is an additional source of uncertainty regarding the outlook for maize and soybean markets. It provides USD 14.5 billion to compensate eligible producers for losses sustained as a result of higher tariffs imposed by countries to counter US trade actions on steel and aluminum and other products. While details on the Market Facilitation Program are yet to be finalized, preliminary indications suggest that producers may have to plant to receive a payment. Tying the payment to plantings would encourage producers to plant a crop rather than take a ‘prevented planting’ insurance payment, which would likely result in more soybeans being planted than previously anticipated.

USDA will publish its Acreage report at the end of June, based on surveys taken over the first two weeks of June, i.e. at a time when many farmers will yet have to complete plantings. Market uncertainty might thus prevail until the fall when a more accurate measure of actual plantings is determined.