US Corn, Soybean, Cotton plantings report falls below Market Expectations; What to interpret from the data

Global agricultural commodity market slowly tries to come out from the clutches of the COVID-19 pandemic. The futures markets for both soybean and corn responded in a powerfully positive manner last Wednesday after release of the U.S. Department of Agriculture’s annual Prospective Plantings Report.

The report, conducted by the USDA’s National Agricultural Statistics Service, is an indication of US farm producers’ intended acreage for crops across the country based on a survey of about 78,900 farm operations. The price behavior was strongly positive as this report on indications of supply tightening situation in longer run. Under given scenario when most of the world is estimating a dwindling inventory situation, such report or data will be always positive from pricing perspective in the Agricultural commodities. On Wednesday i.e. March 31^st, soybean futures at CBOT (Chicago Board of Trade) were up 70 cents a bushel, while corn futures were up 25 cents. Likewise, the US cotton futures had increased by more than a dollar per hundredweight, closing at $80.10 per cwt on the same day. Overall, the plantings data for all these crops fell below the market expectations.  

The U.S. soybean supplies are very tight going into 2021, as per global experts. The US Soybean planting area is currently seen at 87.6 million acres, and experts say that even for a minor increase in this season’s carry-over stocks, there should be at least an increment of 2.5 million acres in coming weeks. Similarly, 91.4 million corn acres is not expected to increase ending stocks either, as viewed by the global analysts. For cotton, even as prices have risen for cotton, the planned acreage has dropped in the leading producing states versus previous year.  The decrease in cotton acreage is mainly because of relatively the ease and lower input costs — with which corn and soybeans can be grown productively. In all, the change in planned cotton acreage was marginal, yet falling less than 1 percent from the 2020 acreage figure, to about 12 million acres. 

The plantings report conveys the possibility of US soybean/corn/cotton markets to trend upwards during greater part of April, in case no major bearish developments/reports are seen for next 2-3 weeks. We shall have to watch out what changes are being incorporated in the upcoming USDA demand and supply report for the major agricultural commodities. Till now the data has been positive (Pricing perspective) for commodities like soybean and cotton in the recent releases. The USDA in its March report has estimated global cotton consumption to expand by 4.1 per cent in 2021-22 seasons, substantially above the long-term average rate of 1.7 per cent. This will be the second consecutive year when world consumption will exceed production. Despite USDA’s hike in the world soybean stocks (due to increase in Brazilian soybean output estimate), in its March report, consistent growth in world soybean usage, are most likely to keep ending 2020/21 supplies at the tightest level in twelve years. In coming days, if the US cotton/Soybean markets continue trading with an upward bias, then it will have a similar impact over the Indian markets.