Assessing Profitability Gaps and The Impact on Planting Intentions.
Expert views from Jake Moline, Risk Management Consultant, StoneX Financial Inc.
Predicting planting intentions is a mostly futile endeavor. No reliable indicator exists to accurately estimate acreage leading into the March Planting Intentions report which the USDA will release on the last day of March. Despite that reality, we will do our best at that exact task now. The best metric I have found that correlates with planting intentions is the difference in projected grower profitability in corn vs. soybeans. Today, using an example grower who has an APH of 220 bpa on corn and 65 bpa on soybeans, current new crop futures prices minus a typical new crop basis, and ISU cost of production estimates for 2025, grower profitability is projected at an $18/acre profit on corn and a projected loss of $75/acre on soybeans. This almost $100/acre gap in projected profitability has widened over the last 2 months mostly from improved corn prices.
The scatter graph below shows this year’s data point as a red star alongside the last 15 years and a correlation, albeit a weak one, does exists. The $100/acre gap in projected profitability would project roughly a 12 mln acre gap between corn planting intentions vs. soybeans favoring corn. If one assumes the total planted acreage between the two will be close to 180 mln acres, that would spit out 96 mln planted corn acres and 84 mln planted soybean acres. I’ve plugged those into what-if new crop balance sheet along with trend yields and what I would expect for demand to solve for a what-if new crop carryout and carryout/use guesstimate. The projected carryout for corn would climb to about 2.3 bln bu next year while the soybean carryout would remain fairly steady near 400 mbu. Both crops would have very comfortable supply situations.
A strong correlation exists between carryout/use and price, and in my opinion, it is the best metric to attempt establish what the fair value is of a bushel of corn or soybeans purely through the lens of domestic supply and demand. Our projected carryout/use ratio in corn would be near 15% while soybeans would sit near 9.3%. If you pretend as if it were the day of the May WASDE, the first month in which the USDA publishes new crop balance sheet estimates, those carryout/use figures would equate to equilibrium prices for new crop futures of $4.50 for CZ25 and $10.75 for soybeans. On the day of this writing (2/21/2025), CZ25 settled near $4.80 and soybeans near $10.60. What is the takeaway? If things play out as outlaid above, we could see some pressure on corn with a chance for light strength in soybeans. Right now, the market is screaming at growers to do more corn on corn, but normal rotation is difficult for most to break. We wont have a good feel for acreage until after the USDA updates us in June and weather always plays a major role in acreage allocation. This past fall fertilizer application season fell well short of the previous two years’ activity as well. My advice: Buy up on crop insurance and start managing some new crop risk and most specifically in corn which may be susceptible to some acreage based pressure in the near future. <<
ABOUT JAKE MOLINE
Jake Moline is a Risk Management Consultant at StoneX Financial Inc. and is based out of their West Des Moines, Iowa office. Jake works primarily with commercial grain companies to individual growers to manage risk and maximize margins. Jake has become increasingly involved in helping to develop grain origination programs for grain buyers that include a variety of specialty grain contracts. Jake conducts numerous producer meetings each year and has been a speaker at various grain conferences. Prior to joining StoneX full-time in the spring of 2012, Jake attended Iowa State University where he received Bachelor of Science degrees in Agricultural Business and Economics.
NOTES FROM MATT ZEMAN
We have seen near-record post-fall grain movement since harvest into CFE. A favorable open winter along with a futures rally has certainly helped that cause, so we truly thank you for the opportunity to serve you. We continue to grow our off-farm grain pickup program, so reach out to any location manager or grain team member and we would be happy to get you started.
On March 31, the USDA Grain Stocks/Prospective Plantings report will be released. Looking toward fall 2025 futures, the profitability continues to lean toward more corn acres. With the potential of near-record corn acres being planted, look to CFE for all your grain risk management and marketing needs.
DISCLAIMER
This material should be construed as market commentary, merely observing economic, political and/or market conditions, and not intended to refer to any particular trading strategy, promotional element or quality of service provided by the FCM Division of INTL FCStone Financial Inc. The FCM Division of INTL FCStone Financial Inc. is not responsible for any redistribution of this material by third parties, or any trading decisions taken by persons not intended to view this material. Information contained herein was obtained from sources believed to be reliable, but is not guaranteed as to its accuracy. Contact designated personnel from the FCM Division of INTL FCStone Financial Inc. for specific trading advice to meet your trading preferences. These materials represent the opinions and viewpoints of the author, and do not necessarily reflect the viewpoints and trading strategies employed by the FCM Division of INTL FCStone Financial Inc.
