The USDA crop reports the last couple of months generated a certain amount of disbelief among traders and hedgers who felt acreage estimates were too high given the number of prevent-plant acres reported to the Farm Service Agency.
Many also felt the yield estimates were too high as well, given the late planting date for much of the Corn Belt, so economists Ashley Hungerford, Shawn Arita and Rob Johansson from the Office of the USDA’s Chief Economist tried to clear the fog.
BACKGROUND
The cool, wet spring resulted in the slowest corn planting progress since the USDA started recording such data in 1980. This led to market and analyst expectations of low 2019 corn acreage and yields.
On June 11, the USDA’s World Agricultural Outlook Board lowered its June projected corn yield to 166 bushels an acre from trend expectations of 176 bushels and lowered projected harvested acreage to 82.4 million from 85.4 million. Estimated planted acres fell to 89.8 million from 92.8 million.
Beginning in early June, NASS asked producers what they planted or intended to plant. For the week ending June 9, only 83% of the corn crop had been planted, a historic low and far below the five-year average of 99%.
At that time, the market signals were to plant corn and not soybeans, and many producers registered their intention to plant corn.
Following heavy flooding in the Midwest, markets anticipated a major corn shortfall while soybean prices continued to face pressure from large carryover stocks. This led the soybean/corn price ratio to fall to 2.0 in early June from 2.4 in March.
Critically, that reduction in relative prices occurred during the planting season, providing a signal to plant corn instead of soybeans, even though the actual size of the crop was still unknown and speculative.
FAS, NASS ACREAGE DIFFERENCES
The planted acreage numbers differ because the data sources are intended for different purposes. FSA data is used for implementing certain FSA programs, while NASS survey data is used for estimating planted acres and harvested acres and explains why these data are difficult to compare directly.
For example, the FSA certified acreage by crop does not include acreage planted as a cover crop. Any cover crop acreage, such as corn silage planted as cover, will be reported to FSA simply as “cover crop” not “corn”. However, NASS will record that cover crop acreage under the planted acreage for corn.
In addition, NASS planted acreage includes acreage not enrolled in farm programs; whereas FSA certified acres will generally be from farmers participating in farm programs.
Because of program participation, FSA-reported planted acreage is a subset of NASS total acreage (with the exception of specialty-type corn) and thus not directly comparable to FSA planted acres.
More critically though is the layer of overlap between reported prevented and planted acres. Since these values are not mutually exclusive, the simple summation of total prevented and total planted acres would overestimate the actual total national acreage.
CATTLE, BEEF RECAP
Cash cattle trade last week ranged from $106 per cwt on a live basis early up to $108 late in the week, up $1 to $3 from the previous week. Dressed-basis trade was at mostly $170, up $5.
The USDA choice cutout Friday was down $0.10 per cwt at $211.96, while select was off $0.29 at $186.92. The choice/select spread widened to $25.04 from $24.85 with 66 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Thursday was $143.60 per cwt, up $0.68 from the previous day. This compares with Friday’s Oct contract settlement of $141.97, down $0.37.