Chore time for me isn't what it used to be when I was growing up on our eastern Iowa farm, but taking care of two horses in the morning before I head in for work gives me a little time to think about the day ahead. Each morning, stop at this spot to get a feeling for the "tone of the day" - and some attitude about agriculture and the markets.
I was thinking…
... first thing -- the crop recovery around northeast Iowa continues. That's not to say the crop "looks great" or anything like that. And that's certainly not the case further south of here where heavy rains last week recharged field ponds and stressed crops. But, around here, things are "perking up" and growth has been very good -- on the crop that has recovered. There is still a lot of the crop, however, that hasn't recovered -- and won't.
Now, onto this morning's reports: Don't get too shook up by this morning's Acreage Report from USDA. I don't care if you're selling grain or buying feed -- the acreage data impact should be relatively short-lived. Reason -- the data didn't change the situation much at all and it clears the way for the markets to start focusing on yield potential.
USDA's planted acreage estimate of 87.327 million acres of corn tells me one thing -- the March Prospective Plantings Report (indicating 86.014 million corn acres) showed us some "false intentions." The "true intentions" for corn plantings were probably in the range of 88.0 to 88.5 million acres. From that, we've lost enough plantings to get us down to the 87.327 million acre level. And, who knows, the resurvey work USDA's National Ag Statistics Service (NASS) does ahead of the August Crop Production Report should get an even better read on actual plantings.
I appreciated some of the comments USDA made in this report regarding expectations for harvested acres. Here's what it said:
"Extensive rains and flooding during June caused producers in several Midwestern States to change their harvesting intentions for crops already planted, modify planting decisions for the small percentage of acres not yet planted, and consider replanting options. NASS collected most of the data for the annual Acreage Report before the majority of the flooding occurred. In an effort to more accurately determine how many acres producers still intend to harvest for grain, NASS re-interviewed approximately 1,200 farmers June 23, 24 and 25 in the flood-affected areas. As a result, it was determined that U.S. farmers intend to harvest 90.4 percent of their planted acres of corn for grain. This is a change from 92.4 percent as measured during the first 2 weeks of June. U.S. farmers intend to harvest 96.8 percent of their acres of soybeans. Without this additional survey data, historical averages would have indicated 98.7 percent of soybean acres to be harvested. NASS will conduct a more extensive acreage update survey during July. Findings from this study will be incorporated in the August Crop Production Report."
The expectations of a lower harvested acreage percentage on corn and soybeans has, so far, generally gone unnoticed by the markets. With corn plantings at 87.327 million, the 90.4% harvested acreage percentage implies 78.94 million harvested corn acres. At 148.9 bu. per acre, that implies a crop of 11.754 billion bu. -- we'll shy of the expected 2008-09 demand pace of 12.51 billion bushels. So, as things currently stand, we'll drain about 750 million bu. from carryover compared to the current marketing year. That's not much different than the "bullish" June Supply & Demand Report.
Consider this: In the June S&D Report, USDA indicated harvested corn acres in 2008 of 78.8 million. That means just 140,000 acres of the "extra" 1.313 million acres planted to corn will actually be harvested for grain. (Yeah... whoopee!)
That implied crop of 11.754 billion bu. is just 19 million bu. more than USDA's June S&D crop projection. (Hardly justifies the limit-down price action in corn this morning, does it?)
Bottom line: Let the dust settle... "thanks" to the smaller-than-average harvested acreage percentage, today's Acreage Report really didn't change anything from the June S&D report.