Phil’s Forecast for Farm Futures

People set their alarms early on Feb. 2, Groundhog Day, to find out if Punxsutawney Phil saw his shadow. Why does this matter, other than to the residents of Punxsutawney, Pennsylvania, who made a year’s worth of income off tourists coming to town on that one day?

A quick Google search of the major industries for the borough had returned a bit of a surprise, as Accommodation and Food Services came in third, with Health Care and Social Assistance leading the way. This could have been tied to Groundhog Day given the number of tourists likely suffering from frostbite and depression given that Punxsutawney Phil has seen his shadow (indicating six more weeks of winter) roughly twice as often as he did not over the past 20 years. 

Some meteorologists had been driven to the brink of sanity by the hoopla surrounding Groundhog Day. Their argument was that there was no science behind the festivities, and when Phil predicted six more weeks of winter all it meant was that winter was supposed to end at roughly the same time as the spring equinox.

In other words, Phil tended to predict winter would end when — well — the winter season came to an end.

Those who have tuned in to watch the festivities in recent years likely noticed the sky was usually covered by heavy gray winter clouds, meaning there was no sun to cast a shadow. Additionally, floodlights surrounded the stage where it all took place, washing out any possibility of Phil seeing any shadow — his or anyone else’s.

Out of curiosity, I tracked the correlation of the outcome of Groundhog Day — shadow or no shadow — to the United States Department of Agriculture’s (USDA) “final” planted acres of corn and soybeans. Interestingly enough, when Phil did not see his shadow, predicting an early spring, U.S. corn acres tended to increase by 2% from the previous year. On the other hand, U.S. soybean acres tended to decrease by 1%.

When Phil saw his shadow, meaning a longer winter, U.S. soybean planted acres tended to increase by 3% while corn planted areas decreased by 2%. Naturally, there are outlier years, most notably the prior two.

In 2023, Phil saw his shadow, yet when the USDA released its “final” acreage numbers in January 2024, U.S. corn planted areas swelled by 7%, while soybean planter areas contracted by 4.5%.

Last year, Phil did not see his shadow, yet corn acres were down 4% while soybean acres supposedly increased by 4%. That was convenient, right?

For many in U.S. agriculture, the majority only believed what the USDA told them. When it came to planted acres, the bulk of the industry waited anxiously for the end of the March Prospective Plantings report.

To explain my thoughts, as if you haven’t already guessed, the definition of “prospective” in the dictionary I’ve had on my desk for more than 40 years is: adjective 1. Likely to happen.; expected. 2. Likely to become or be.

A quick search of synonyms for “likely” returns the words probable, possible, plausible, imaginable and so on. To summarize, it was safe to say the USDA’s Prospective Plantings guesses may or may not happen, a reality that doesn’t provide much clarity.

Think of it this way: The folks who religiously followed any and all USDA imaginary numbers brought to mind a couple famous quotes:

First, from Karl Marx, “Religion is the opium of the masses.” The second comes from Ralph Waldo Emerson, “A foolish consistency is the hobgoblin of little minds.” The reality is, as usual, the market tells us what we need to know.

By studying the November soybean/December corn futures spread we could read what the market was signaling about its needs for spring planting. I tracked this spread for six months, from the first weekly close of September through the last weekly close of February, plotting weekly closes and calculating averages.

Over the previous 10 years, the spread had shown an average weekly close of 2.4 (November soybeans priced 2.4 times more than December corn). Theoretically, then, it could be assumed if the current year’s spread was running above that average then it indicated the U.S. was looking for more planted soybean acres (the 2024 spread had an average weekly close of 2.46).

If running below, then the corn market was trying to buy planted areas away from soybeans (the 2023 spread had an average weekly close of 2.26). Through the first 20 weeks (out of 26) of the 2024-25 tracking period the 2025 futures spread showed an average weekly close of 2.33 meaning the market: a) wanted more corn acres planted, or b) wanted fewer soybean acres planted.

As winter eventually turns to spring, U.S. producers had to deal with the same set of factors as always: weather, production from competitors and trade policy just to name a few.

The reality was that it didn’t matter what U.S. producers wound up planting. What mattered was how traders positioned themselves in the markets. As for Groundhog Day, one thing remained: “Okay campers, rise and shine, and don’t forget your booties ‘cause it’s cold out there ... .”