Another Look at Acreage Numbers

In the Bible, Jesus talks about the consequences of building a house upon the sand versus the man who built his house upon a rock. We won't get into the theology, but rock (or concrete) is going to be a firmer base for your foundation than some shifty sand. In marketing terms, we just received some of the shiftier numbers USDA puts out -- the annual Prospective Plantings report. I am still a big fan of this report, because it does give a producer time to change plans if the market he or she has been targeting is at risk of being oversupplied in case everyone else went in the same direction during the winter. But we must be aware of its limitations.

How reliable are these acreage intention estimates versus final plantings? For corn, they aren't bad, with a 20-year root mean square error of 2.3%, or 4% at the 90th percentile confidence level. In English, that means final acreage is most likely to be plus or minus 1.5 million acres of this year's 95.326-million-acre figure, with the largest March-to-final shift in those two decades at 6.558 million acres. Soybeans are slightly less predictable, at 3.4% and 5.9%, respectively. Beans are planted later, on average, and double crop can also be expanded if price signals dictate. That increased flexibility makes some sense.

What are the really shifty numbers? The average acreage shift from here to final on upland cotton is 7.7% (13.3% at the 90% confidence level). Durum wheat is VERY dicey at 21.5% (37.2%) but also a piddling 2 million acres plus/minus on a roughly 340-million-acre national cropland base.

Can the corn or soy acreage shift? Of course! If not intentionally, then through weather and the prevented planting process. Our baseline assumption is about 4 million acres of prevented planting nationally, with less in a dry spring and more in a very wet spring. Is the market trying to encourage corn/bean shifts? The February crop revenue insurance prices give us a starting point. The soy-to-corn ratio for insurance in 2025 is 2.242:1. You have to go back to 2011 and 2013 to find a year with soybean prices that weak relative to corn.

What about March futures prices? The NASS survey data was collected between Feb. 27 and March 18. New crop corn spent much of that time between $4.45 and $4.55, with November beans between $10 and $10.20. Both had already come down from their February highs as the survey window was opening. The new crop futures ratio was also in the 2.24-2.25 area for most of March. Anything under 2.3 is getting you more corn and fewer beans than you had the previous year, so the switch to corn from beans was well anticipated in the trade average guesses coming into the report.

I can argue that both markets were already trading a bigger corn number and smaller bean number at the middle of last week, compared to the published trade estimates. That would help explain why corn rallied modestly after the report, along with a slightly friendly stocks number.

Looking at the U.S. Primary or Principal Crop Acres table accompanying this column, what surprised me? Mostly wheat. It's not unusual for winter wheat area to shift versus the January number, but a 2.3% drop was more than the trade was expecting. Other spring wheat prices haven't been great, nor have margins.

However, given the tariff escalations with Canada and the heavy dependence of U.S. flour mills on imported Canadian hard red spring wheat and durum, you might have expected either price or basis to stimulate more U.S.-based production in 2025. This survey says you aren't getting it.

There is one pretty good reason. Based at least on what NASS knows right now, there was a heavy shift to winter wheat varieties in Montana. Winter wheat area is up 17.9% from last year in that state, at 2.3 million acres. Other spring wheat is down 12.2% year over year at 2.15 million acres. Durum area is also down in Montana, Arizona and California but up 8.2% for North Dakota. Minneapolis September spring wheat futures did rally 50 cents from early to mid-March but had given it all back by March 28 (maybe thinking they were getting some acres?)

So, what is the bottom line? Obviously, I've been suggesting that you not overreact to the Planting Intentions numbers, particularly those that tend to not be as statistically reliable. Soybeans probably don't need to buy more acres unless South American production numbers shrink and trade relations with China thaw. Soy stocks have been tightening, but still allow $9-type lows over the next year with average trading ranges.

You want something bullish? Show me a big jump in renewable biodiesel obligations and keep steep tariffs on imported palm oil. That would get the planned and under-construction soy crush plants and refineries a bigger market and "made in USA" credentials.

The president hasn't helped ag with that thus far, basically telling oil companies and the biofuels industry to get together and work out a compromise. Corn ethanol can be in that conversation, but E15 is the main playing card. Soy has already been shifting away from exports toward domestic industrial consumption. More industrial use might require more acres. Cotton at 70 cents is better than the 66-67 cents we saw in early March (Dec contract), but the net revenue per acre still looks miserable, and the export dependence is real.

Alan Brugler can be reached at alanb@bruglermktg.com

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