Corn futures fall 2% as plantings surge 8% on year

Corn futures fell 2% on Tuesday after the results of the USDA’s prospective planting survey showed that the 2020/21 crop could cover an area of 97 million acres, up 7.3 million areas on the previous marketing year and close to 3 million acres above analyst expectations.

Futures were trending 2% lower on the release of the news, with the May contract changing hands at $3.34/bu shortly after 1200 eastern time.

But despite the higher than expected results, most market participants expect this area to eventually drop following sharp falls for corn futures in the past several weeks as demand from the ethanol sector collapsed, leading many plants to shut down or slow operations.

“Tuesday numbers’ impact may last 3-4 minutes before the markets say they are old and [farmers] have already changed in 2020’s US planting levels,” Jerry Gidel from Midland Research told Agricensus.

“No question. The corn number today will be considered the high-water mark for the year.” Charlie Sernatinger from ED&F Man told Agricensus, framing the expectation that actual plantings will be lower.

An additional hurdle to planting such a high volume of corn is also the problems farmers have been having in terms of securing financing for the crop, with some banks reportedly offering only some of the loans required to purchase seeds, fertilizers and other inputs.

“Hearing a lot of talk that many farmers are only getting 90% of their operating loans from banks. If that is the case, it costs about $600/acre in Illinois to plant corn, and $300/acre to plant beans. Even though it looks like it is more profitable to plant corn than beans, if you can’t get the money to plant corn with the higher input cost, you will plant beans instead,” Sernatinger added.

In terms of soybeans, farmers are expected to plant 83.5 million acres, up from the previous year’s 76.1 million acres when heavy rainfall throughout March to June caused many acres to be lost.

But this was close to 1.5 million acres below analysts’ expectations, and below the 85 million acre forecast made by the USDA back in February.

Finally, in terms of wheat the expected acreage for 2020/21 came in at 44.7 million acres, down 1% on the previous year to fall just shy of analysts’ expectations and the figure for last year of 45 million acres and 45.1 million acres respectively.