Tight agricultural supplies accompanied by strong demand are adding up to some of the best commodity prices in years. They're also contributing to what's expected to be a classic acreage battle next year.
The private firm Informa Economics predicted this week that U.S. corn plantings will exceed 93 million acres next spring, approaching their highest level since World War II. That would be just 400,000 acres short of the all-time high set in 2007.
The firm cut estimated soybean plantings to 75.8 million acres, down nearly 2 million acres from this year.
Informa increased estimates on 2011 wheat plantings to 56.1 million acres, up more than 3 million acres from this year, and predicted cotton sowings will rise to a six-year high of 12.2 million acres.
Against that backdrop, the Agriculture Department released its latest November production estimates.
Despite reducing its previous estimates on yields and total production, the Agriculture Department predicted this week that U.S. farmers will still harvest the third-largest corn crop in history.
According to USDA, 2010 corn yields will average 154.3 bushels per acre. That's down nearly 10 percent from last year. Total production is pegged at 12.56 billion bushels, down 1 percent from the October guess and 4 percent lower than last year's record 13.1 billion bushel harvest.
Nearby corn prices reacted bearishly to the news, declining 9 points on Tuesday in a pullback that continued in sessions later in the week. But the retreat probably was due more to a strengthening dollar than to the latest production estimates.
USDA increased its previous estimates on 2010 soybean production, predicting growers would harvest a record 3.38 billion bushels on yields of 43.9 bushels per acre. But notions of record production failed to scare the bulls out of the soybean pits, and nearby prices rallied 54 cents Tuesday and broke through the $13 barrier.
But the real action this week was in the softs. According to USDA, America's cotton producers will harvest 18.4 million bales this fall. That's down 2 percent from last month's estimate, but still reflects an increase of more than 50 percent from 2009.
Nevertheless, cotton prices traded briefly this week at an all-time of $157 on blistering foreign demand amidst the tightest supplies in 85 years.
Virtually all of the softs rallied this week, as cotton, sugar and coffee ALL traded at multi-year, if not all-time highs.