Trade attention is starting to shift more toward the upcoming spring planting season in the United States. This has generated more market talk on what we will see for planted acreage this coming spring.

Last year U.S. farmers seeded 94.9 million corn acres and 83.6 million acres of soybeans. Many analysts are calling for a shift from corn to soybeans this year as soybean economics appear to be more favorable. While soybeans do have a slight edge over corn by simply looking at new crop futures, a shift from one crop to the other is not a given.

For one, farmers in the United States would rather plant corn than soybeans from a simple logistic point of view. Most operations are better suited to produce and handle corn, and this is a determining factor in plantings. There are also more marketing choices for corn than soybeans in the current market. That all said, some farmers see more opportunity for soybean futures than corn, especially with the domestic stocks to use on soybeans in a rationing position.

The real question is how many acres may shift from corn to soybeans this year. For the most part a 2-to-3-million-acre rebalancing of acres is being expected and would not really come as a surprise. This has prevented the new crop soybean futures from rallying in an attempt to “buy acres.” Given current yield expectations and demand forecasts, the corn complex will easily be able to absorb a decrease in plantings of this size. In fact, the case can be made that U.S. corn acres need to decline by at least 5 million this year to prevent ending stocks from building to a burdensome level.

This change to focusing on the spring planting season also placed more attention on U.S. weather forecasts. Several regions of the United States remain abnormally dry with some in extreme drought conditions. These conditions are actually bearish right now as a dry spring tends to lead to a faster planting pace and fewer prevent plant acres. A dry spring can also favor corn seeding over soybeans as there is more time to get the crop planted.

Recent rains and precipitation events have diminished the concerns over major drought in the U.S., as has the fact that the current percentage of area in drought for corn and soybeans is less than a year ago. Long range models do not indicate a major drought event this year either. Even so it would not take much to elevate drought levels and this will keep a certain amount of risk premium in futures values.

The global commodity market continues to be heavily influenced by the economic indicators. The economy that is being watched the closest is China’s. Chinese officials released a statement that the country’s retail sales increased 7.2 percent in December 2023 from December 2022. A big jump came in December restaurant spending that increased 30 percent year to year. Yearly restaurant spending in China grew by 20.4 percent. Grocery spending also increased by 5.2 percent on the year. We must remember that China was still in a COVID lock-down in 2022 which made it easy to see improvement in 2023.

The Chinese housing market is less promising though as construction was down 7.8 percent for the year. China remains in a state of deflation which is tempering overall economic growth.

News out of China has also dominated the livestock market recently, mainly the country’s 2023 red meat production data. Pork production in China was a record for the year at 57.9 million metric tons, a 4.6 percent increase on the year. This was from heavy liquidation in the Chinese hog herd with yearly slaughter coming in at 726.6 million head, an increase of 3.8 percent from 2022. The majority of this was from an increase in the 4th quarter slaughter of 7 percent for 14.93 mmt of pork as feeders liquidated herds to avoid African swine fever losses. China’s 2023 beef production was up 4.8 percent on the year at 7.5 mmt. Even poultry production was up 4.9 percent in 2023 at 25.6 mmt.

We have seen a shift in attitude toward South American soybean production in recent weeks. Both Argentina and Paraguay are reporting better crops than a year ago and are now raising their production outlooks. These increases are larger than the decreases we have seen in Brazil which is a primary reason the soybean market outlook has changed in recent weeks.

One example of this is that last year Paraguay sold its soybean production into Argentina to cover that country’s crop losses. These soybeans will now be available for export, adding nearly 7 mmt to the world supply. On top of this is a likely increase to the Argentine crop of at least 25 mmt from last year. This comes as global soybean demand is softening, applying further pressure to the soy complex.

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