Crop prices rally as USDA cuts corn, soy acres

US farmers will plant fewer corn and soybean acres than expected in 2018, sending futures prices for the two major crops higher today.

The US Department of Agriculture (USDA) estimated corn planted area at 88mn acres, down by 2.1mn acres from 2017 and below market expectations. Soybean planted area was projected at 89mn acres, about 2mn acres below expectations.

December new crop corn futures prices settled up by 14¢/bushel from the previous day to $4.11/bushel. November soybean futures prices rallied up by 30¢/bushel from the previous day to $10.49/bushel, a contract high.

Nearly every major corn growing region posted significant declines from the previous season, with exception of the Southeast where corn acreage improved by 50,000 acres.

The largest drop was in the Northern Plains, where 1mn acres were lost. North Dakota diverted 370,000 acres out of corn production in favor of wheat and canola, while Kansas shifted 400,000 acres from corn to cotton and wheat. Nebraska transitioned 250,000 corn acres completely out of production. Corn Belt states lost 400,000 acres from last year as Indiana and Illinois declined by 250,000 acres and 200,000 acres, respectively, more than offsetting Ohio's 50,000-acre increase. Soybeans and cotton displaced 50,000 corn acres in the Delta, 30,000 corn acres in Appalachia and 90,000 corn acres in the Southern Plains.

Soybean planted area expectations are higher than corn for the first time in 35 years, despite a year-over-year decline.

Only the Delta and Southeast are expected to expand soybean area this season as most regions posted moderate declines.

The Northern Plains posted a 400,000-acre decline in soybean area behind decreases in Nebraska and Kansas. Farmers in the Corn Belt dropped 350,000 acres out of soybean production as Indiana's 150,000-acre increase was more than offset by 250,000 and 200,000 acres decline in Ohio and Iowa, respectively. Soybeans lost 330,000 acres in the Great Lakes as farmers in Minnesota and Michigan opt for wheat.

Soybeans posted a 130,000-acre year-over-year improvement in the Delta with notable spikes in Arkansas, Louisiana and Mississippi. In Appalachia, North Carolina and Tennessee shifted to cotton by 100,000 acres and 90,000 acres, respectively, offsetting minor increases of 30,000 acres in Virginia and 50,000 acres in Kentucky.

Total wheat acres are slated to expand by 1.3mn acre from last year to 47.3mn acres, slightly above market estimates and the second lowest-ever since tracking begin in 1919. In spite of increased acreage, the May wheat futures today increased 6¢/bushel to $4.52/bushel, as US wheat stocks were down by 10pc from last year to 1.49bn bushels. Only the Southern Plains reported a year over year decline in all wheat acres as the primary variety in the region, winter wheat, has already been planted. The rest of the US will experience a rise in wheat acreage for the spring variety. North Dakota is expected to increase spring wheat area by 810,000 acres.

Cotton will continue its resurgence in 2018 as planted area is expected to expand by 1.3mn acres from last year to a 12-year high of 13.5mn acres. Texas planted area increased by 400,000 acres to 7.3mn acres. Oklahoma farmers switched 95,000 acres of wheat to cotton for 2018. Georgia and North Carolina both raised respective cotton acres by 170,000 acres and 65,000 acres year-over-year.

The USDA pegged overall cropland for the 17 principal US field crops at an estimated eight-year low of 317.9bn acres.