US corn acreage threatened by price cuts

Plunging corn prices throughout the Midwest are likely to detract US farmers from planting the largest corn crop in eight years.

Growers in early March said they intended to plant 97mn acres of corn this season, but sinking demand for fuel over the last two weeks has slashed near-term corn demand.

The ratio between soybean and corn prices in the Corn Belt and Minnesota is now above the 2.5 threshold typically seen as encouraging farmers to plant soybeans. At the start of the month, when the US department of agriculture (USDA) was surveying farmers' planting plans, the ratio was under 2.5 and favored corn acreage.

The USDA's survey showed farmers plan to plant an additional 1.5mn acres of corn from last season across Iowa, Illinois, Indiana, Ohio and Minnesota while cutting 650,000 soybean acres.

But seed suppliers typically allow farmers flexibility to alter their planting plans until very close to planting, a dealer said today, which could enable some price-driven switching with much of the Corn Belt yet to start fieldwork.

Ethanol production dipped to a near to a seven-year low of 840,000 barrels/day last week, according to the EIA, 16pc below the prior week with gasoline demand tanking as coronavirus-driven lockdowns reduced travel.

The cuts in ethanol production could result in a loss of up to 500mn bushels of corn demand and buyers across the Midwest have subsequently lowered bids for old-crop and new-crop corn, enabling the price ratio between corn and soybean to favor soybean planting.

New-crop corn bids from terminals in the Corn Belt and Minnesota fell by 6-9pc from the start of the month, while soybean prices fell just 1-4pc, according to the USDA.

The USDA releases acreage estimates throughout the season, and the greatest difference between March survey and final planting to-date has been 3.1mn acres on corn and 3.3mn acres on soybeans.

By Bede Heren

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