US farmers rake over crop options
US farmers have rarely been so spoiled for choice when it comes to choosing which crops to plant. Corn, wheat, soyabean, oats, rice, barley, hay, canola and sunflower prices are all at or near record levels.
Which crops farmers will plant this year should become clearer on Monday when the US Department of Agriculture publishes its Prospective Plantings report, based on a survey of 86,000 farm operators in the first two weeks of March.
The report will set the tone for trading in agricultural markets this year because it will provide an insight into the crops that have emerged as winners and losers in this year's battle for land.
The report comes at a time when agricultural commodities have won the lion's share of the vastly increased investor inflows that have entered commodity markets this year.
The question is how farmers' planting intentions will affect supply dynamics and prices at a time when global grain inventories have shrunk to multi-decade lows.
Last year, the push for ethanol production in the US led farmers to rush to corn with a postwar record of 93.6m acres planted in 2007-08, up almost a fifth on the previous year. Corn faces stronger competition from other crops this year.
"We anticipate the plantings report to show US farmers intend to increase wheat and soyabean acreage and to reduce acreage for corn and cotton," says Sudakshina Unnikrishnan, of Barclays Capital. This view, which is widely held in the market, reflects price performances.
Over the past year, increases in the benchmark wheat and soyabean contracts, at 132 per cent and 76 per cent respectively, have outperformed corn and cotton, up 47 per cent and 58 per cent respectively.
As well as considering price signals, farmers' planting decisions will depend on what yields they can achieve, input costs and a final uncertainty, weather. This means forecasting how the acreage battle will be resolved is difficult.
Record prices have created strong incentives for producers to increase croplands with some hay and pasture lands expected to return to active crop production and further acres being released from the government's Conservation Reserve Program.
