The end of March and end of June USDA reports have reputations for big price moves and volatility. We got some truly big price moves, but very little volatility on Wednesday, March 31, following the Prospective Plantings and March 1 Grains Stocks reports, because corn and soybean futures locked limit-up right after the reports were released.
USDA surveyed 78,858 U.S. farmers between Feb. 27 and March 18 about their planting intentions for 2021. The planting intentions report is intended to give you information early enough to change your mind if too many producers are planning to grow the same things you are. The soy-to-corn ratio at 2.55 to 2.66:1 over the past months has been pleading for more bean acreage. However, crop rotations call for more corn after wet weather "forced" extra bean plantings the past two years. Common corn fertilizers have also risen sharply in price; soybeans typically require fewer inputs.
So, what's USDA say? Producers intend to plant 91.14 million acres of corn. Not only was that shy of the trade estimates, but it was also short of the 92 million acres suggested by USDA in the Ag Outlook forum. That is up 0.33 million over last year, with most of that coming from the Dakotas. If we examine the top 10 states (leaving out South Dakota, with North Dakota at 11), we see that corn acres are actually down 1.65 million acres. Only South Dakota and Wisconsin were higher than last year's final, with Minnesota unchanged.
We understand fertilizer costs are high and the soy-to-corn ratio says plant beans, but with these prices, will acres only be up a total 330,000? As for soybeans, USDA says producers intend to plant 87.6 million acres this spring. While up 4.6 million from last year, that was well shy of the 90.1 million expected and the 90 million seen back in early February by USDA.
Wheat acres were unexpectedly higher, as USDA caught more winter wheat acres this time than in the Winter Wheat Seedings report. In total, winter wheat acres were up 1.08 million acres from January, with 700,000 acres in Texas alone and 100,000 in Colorado. That helped to push total wheat acres higher than estimates by 1.4 million acres. Other spring wheat acres were seen at 11.74 million acres, in line with pre-report estimates.
Cotton acres were expected to be close to last year heading into this report. A few months back, we wouldn't have said that, but a rally in prices has led to the fiber being somewhat more competitive with grains. Intentions are 12.036 million acres, very close to pre-report ideas. As for another major Southern Plains crop, sorghum is expected to see a sharp uptick in acres this spring. The Prospective Plantings report pegged acres at 6.94 million, up more than a million from last year; that would also be a six-year high. Given the tight balance sheet, dry conditions to the west and extremely positive basis, an increase that size or even more is not surprising.
We do have a bit of a problem with the overall acreage numbers: In 2019, heavy rainfall totals and flooding sent prevented planting (PP) acres to around 20 million. Last year was still an abnormally high 10.2 million acres for PP due to flooding in the Dakotas and other reasons. We have been assuming PP would drop to a more typical 2-3 million acres, and given the dry conditions in the Western Corn Belt, that could even drop below a million, as was the case in 2012. If you throw in the other crops not in our graphic, USDA shows total principal crop acres at 316.164 million. That is up 6 million from last year. However, the 10-year average, excluding the 2019 and 2020 flood years, is 320.6 million. There are about 4 million acres missing. Combining principal crops, CRP and PP gives you the U.S. crop base. The 10-year average there is 350.656 million.
Subtracting 336.764 million for this year's principal plus CRP, you have about 14 million acres of prevented planting ground. That's more than last year! At the extreme, it could imply 10 million missing acres. However, we have been averaging 343 million to 346 million in base for the past few years, and the rest may have been lost to concrete. Using 345 million still leaves 8-9 million PP. Given current weather forecasts, that seems improbably high. Thus, our conclusion is that some acreage is missing and will show up by June.
How well does the Prospective Plantings report signal final planted acreage?
Keep in mind that the report exists to warn you when everyone is on the same side of the boat. You should expect some shifting. USDA does give us a public track record for this one. These numbers are excerpted from page 33 of the Prospective Plantings report, and answers the question, "How reliable have the intentions numbers been over the past 20 years?"
|Root Mean Sqr Error (%)||90% Confidence Level||Avg Acres Miss vs. Final||Smallest||Largest||Years below final||Years above final|
|Corn||2.1||3.7||1.288 million||32,000||6.171 million||9||11|
|Soybeans||3.2||5.5||1.633 million||185,000||8.517 million||9||11|
We see that, historically, USDA has a root mean square error from March to final of 2.1% for corn, 3.2% for soybeans and 1.7% for winter wheat. The historical variance from the survey to actual final acreage is greater than 5.5% for other spring, oats and barley, and over 7% for cotton. Durum holds a 21.6% average miss from intentions to final acreage. The largest miss in corn acres from March to final in the past 20 years has been 6.171 million (average is 1.288 million), and that was the drop in 2020! The largest swing in soybeans has been 8.517 million (average is 1.633 million) -- so, things can still change quite a bit!
Alan Brugler can be reached at email@example.com
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