Chip Flory: The 2023 Acreage Puzzle

USDA’s Annual Ag Outlook Forum is an attention-grabber for traders and farmers. This year’s event is Feb. 23-24. It’s the USDA chief economist’s first unofficial look at 2023/24 — basically it’s their best estimate of new-crop supply and demand. 

First on the list of items to check when the balance sheets are released is planted acreage expectations. 

Analysts on “AgriTalk” have speculated on corn and soybean acreage since October of last year. Expectations of tight beginning stocks for 2023/24 (carryover for 2022/23) for corn and soybeans means neither new-crop market can fail to provide producers with incentive to plant “enough” acres in 2023. 

Generally, analysts expect corn and soybean acres combined to reach 180 million to 181 million acres. Acres are still expected to favor corn by a narrow margin — 89 million acres of beans with 91 million to 92 million acres of corn was a consensus estimate at mid-January. 

At those levels, trend line (and record) yields would be needed to build carryover of both corn and soybeans back to comfortable (bearish) levels. 

But there is plenty of outlook uncertainty:

• December 2023 cotton futures below 90¢ are doing very little to hold onto last year’s nearly 13.8 million planted acres. Most industry analysts see cotton acres south of 12 million this year. A few – including Texas Tech University professor Darren Hudson. As of Jan. 20, Hudson says the corn-to-cotton price ration suggests planted cotton acres of just 9.9 million in 2023. That could add 3.5 million acres to the corn/soybean mix in 2023.
• Winter wheat seedings for the 2023 crop at 36.95 million are up nearly 3.7 million acres from 2022. Some changes to crop insurance up the odds of more double-crop bean acres – that could add another half-million acres to the corn/soybean mix. The condition of the hard red winter wheat crop last fall suggests a much higher-than-normal abandonment of wheat acres in spring 2023. It’s tough to estimate how many acres could go from winter wheat to corn or sorghum. That will be determined by rain and soil moisture in the Central Plains.
• Another area to watch in spring 2023 that could change up the acreage mix is North Dakota and South Dakota. Wet weather could move acres to even more beans in the northwest production area.
• Spring prices for revenue protection crop insurance products will influence acres. This will be especially true outside the core of the Corn Belt where producers are generally locked into rotations. 

HIGHER ACRES IN 2023?

USDA’s National Ag Statistic Service will release the first survey-based estimate in the March 31 Prospective Plantings Report. It will show producers’ intentions for the year-ahead and comes after the spring price for crop insurance has been set. 

History suggests combined corn and soybean acres of up to 181 million, but the unknowns above suggest combined acres could be higher in 2023. While more acres would provide some supply-side cushion to absorb a yield nick in 2023, carryovers are likely to be low enough to minimize downside price risk until markets become confident that 2023 crops can reach trend line yields.

That does not eliminate downside risk from mid-January’s lofty prices into spring 2023 as traders anticipate increased acreage availability for corn and soybeans.