The USDA expects American farmers to plant more acres of soybeans this year than any in history. The glut of soybean stockpiles and expectations for another bumper year are driving prices to six month lows (which you can see on my chart below).
Corn and wheat are facing similar situations with large inventories sitting in storage. Farmers are trying to cut acreage, but not at a rate fast enough to affect stockpiles. The WSJ reports:
Soybean futures closed near a six-month low on Friday after the U.S. Department of Agriculture forecast that nearly 90 million acres of the crop will be planted across the country this year, a roughly 7% increase from 2016.
On top of a record harvest from rival producers in Brazil and Argentina, traders are betting that huge global stockpiles of the oilseed, as well as of corn and wheat, will continue to grow.
A separate USDA report showed domestic stockpiles of all three crops as of March were up from last year, with corn at an all-time high. Corn plantings are expected to drop 4% this year and farmers are projected to sow the fewest acres of wheat on record, according to the government.
But those cutbacks won’t be enough to make a significant dent in stockpiles, analysts say. “We’ll have plentiful supplies,” said Dave Marshall, of brokerage First Choice Commodities. “To see a price rise that a farmer would like to see, those levels are too large.”
U.S. farmers are expected to plant some 6 million additional acres of soybeans this year in part because corn, the biggest U.S. crop, is more expensive to cultivate. Farmers are trying to cut costs as low prices for both crops fuel a prolonged slump in the farm economy. Farm incomes are expected to fall for a fourth straight year.
Read more here.
Dick Young
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