It's spring!

The USDA released its Prospective Plantings report March 31, which, as any agriculture investor knows, is when spring really starts. The Prospective Plantings report is a survey done during the first two weeks of March of what farmers intend to plant in the coming growing season. It is also the market's first peek into what agricultural supply might look like for the next year, and as such, is widely covered (such as here, here, here - you get the idea).

Expectations

Here's what the expectations looked like last week, before the report was released, according to analysts at Dow Jones and on Bloomberg.

                 (millions of acres)

In other words, farmers were expected to plant between 4-7% less corn due to crop rotation considerations (good farming practices call for corn and soybeans to alternate growing seasons on the same fields) as well as the rising cost of growing corn - think high seed and fertilizer prices (curse you Monsanto and Potash!). Soybean plantings were expected to rise about 12-13% due to lower input costs than corn, high demand and rising futures prices. Wheat plantings were expected to rise a modest 5%, mainly due to the tight market conditions and rising global wheat prices.

Given those expectations, the market behaved as you would expect, with corn prices rising and soy and wheat falling. Here's what the weekly prices looked like as of 3/28/08, heading into the report.

Corn (C, CBOT) Weekly

Soybeans (S, CBOT) Weekly

Wheat (W, CBOT) Weekly

Then the report was released.

Unlike a company's stock, which has hundreds of variables affecting price, ag commodity prices have fewer variables to deal with (weather, plantings, weather, demand, weather, China), and so any news can move the market dramatically - even when the news isn't all that dramatic.

This time the analysts got the vectors right, and were even in the ballpark with corn and wheat. They were just a bit off on exactly how many MORE acres of soybeans would be planted. The results were immediate.

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