Bryan Doherty; Acreage report overblown?
The much anticipated acreage report is due out from the USDA on March 31. This will give the market its first glance at what farmers intend to plant. How much bearing does it have? It could be an earth mover as far as reports are concerned. The market will pay close attention. However, does it really have that much bearing? We would argue probably not.
As spring weather goes, so may acreage. With significant fall tillage done, if there is a break in wet weather conditions in the North and farmers make significant on time planting progress, look for more corn acres. Why? It's simple logic. Farmers who rapidly plant corn have two things going for them. One is a greater confidence that, once the crop is in the ground, it will be higher yielding, especially with the old adage "the earlier the better". The second, of course, is impatience. With high return on investment and the likelihood to pencil a profit into the planting season, farmers will likely be impatient waiting to plant beans and, therefore, plant extra corn acres.
If, on the other hand, planting delays are a concern, beans have been priced high enough that farmers probably won't wait forever to switch into more bean ground. However, we believe most farmers prefer corn as the commodity of choice. Corn has historically been more production dependable than beans. The trend-line for yield continues to edge upward. Bean production, however, has been so erratic that farmers still are somewhat less confident on yield dependability. That thought process may be changing the last 4 to 5 years as yield has become consistent. In addition, farmers fared much better planting beans in some regions of the country (from a yield perspective) last year than they did corn.
The other item to remember is corn acreage, may have little bearing. The focus will be on yield potential. If, for example, the market is expecting 92 million acres planted and in fact farmers plant 94 million, that provides an extra 2 million acres of corn. Assuming 95% is harvested for field crop, this means 1.9 million acres of increased harvested corn. At a yield of 165 bushels per acre this increases production to 313 million bushels. What happens if yield drops from 165 to 155 bushels per acre? Using 94 million acres at 95% harvested, this equates to 88.36 million harvested acres. A drop of 10 bushels yield and then you have a decrease of 883.6 million bushels. Obviously, the yield number has a much greater impact. What happens if yield is down 20 or 30 bushels an acre?
So in the end, the acreage number is something we all like to talk about, though in reality, the true figure probably won't be known until the June acreage report. Until then, the market will focus its attention on weather. Supplies are tight enough in corn and beans that, as weather projections go, so likely will crop prices. Expect a lot of volatility.