Should You Believe the USDA Acreage Report? Context Matters

July 5, 2017 03:20 PM
Late Emerge Corn

After the USDA’s June 30 acreage report last Friday, some people were questioning its accuracy. The March 30 prospective planting report had corn and soybeans within 500 thousand acres of each other, and many anticipated some of those corn acres moving to beans after April and May made for one of the wettest springs on record. But the June report widened that gap to 1.4 million acres, with corn currently estimated at 90.9 million acres and soybeans at 89.5 million acres.

What’s out in the Fields?

Bob Utterback, president of Utterback Marketing Services, Inc., in an interview with Farm Journal Broadcast’s Tyne Morgan and Clinton Griffiths, said “Nobody believes this number.”

Utterback says that’s one reason that corn markets rallied after the report came out, despite the increase in corn acres. With reports of farmers in Ohio, Indiana, and other corn and soybean states having issues with corn, he’s confident that post-harvest acres will tell a different story.

Paul Bertels, Vice President of Production and Sustainability at National Corn Growers Association says that while many thought wet conditions in April and May across much of the lower Midwest would mean drowned corn and a switch to soybeans, that was a relatively isolated weather incident.

“The danger as ag economists that we tend to get into, is to think of this collectively - all corn growers act as one mindset,” says Bertels. “This was a collection of individual decisions, not a collective decision.”

Bertels says that even as grain prices have stayed relatively low, high yield potential is keeping growers in corn.

“There’s a really big crop in the western corn belt, growers are thinking, ‘Yeah, prices are down, but yield’s kind of compensated for that lower price, so I’m going to stick with it.’”

But the growth in soybeans may reflect a move toward safety. Ron Moore, President of the American Soybean Association, says lower input costs in soybeans may not only be more attractive to producers, but also to banks.

“Farmers have been operating on their cash reserves, and those are dwindling now and banks are kind of feeling the same thing,” Moore says, adding that banks are more likely to say, “Let’s put a lower-input-cost crop in.”

Watch Bob Utterback’s entire interview, including marketing advice, on Farm Journal TV’s Facebook.

Did USDA Get it Right?

After the report came out, Chip Flory, host of Farm Journal’s Market Rally, asked USDA about its methodology and shared the response on Friday’s show.

“This is from USDA: ‘Farmers responding to the survey indicated that 98% of intended corn acreage had been planted at the time of the interview – slightly higher than the 10 year average,’” says Flory. He explains that slightly more acres were planted by June 1 in 2015 and 2016, but by less than 1%.

On the other hand, more soybeans had been planted by June 1 than in the previous two years. So Flory doesn’t think the planting numbers are too far off.

USDA’s June acreage report is looking at planted acres, which may not end up being harvestable acres.

“I think you’re also going to see corn that was planted and drowned out, wasn’t replanted, so you’re going to see some acres abandoned,” Bertels says. “That corn acreage was planted. It’s just whether or not it will be harvested.”

“I don’t think it reflects what’s out in the field,” Utterback says. He says he doesn’t disagree with the USDA lightly, and that even if planted corn acres are above 90 million acres, spotty crop conditions means harvested acres likely won’t hit that mark.

“We’re still in a wild card time period,” Utterback says.

On that point, Flory agrees. He points to another recent conversation on Market Rally.

“Rich nelson from Allendale was on and he said, ‘Don’t expect much movement on corn and soybean acres in this report,’” he says. Flory says as we move into the late summer and fall those numbers will come into sharper focus: “If you start to see that, well, these numbers aren’t lining up, maybe we need to take some off of corn, because, no, they didn’t get everything planted that they intended to plant.”

Listen to Chip Flory explain the USDA’s June acreage report methodology on Market Rally.

“There’s a lot of growing season left,” Bertels says. “Just because USDA says it got planted, doesn’t mean it’s going to be harvested.”

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