What Past USDA Prospective Plantings Can Tell Us About 2022

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AT-A-GLANCE

Over the past 20 years, Prospective Plantings has published an intended acreage for corn that differs from observed acreage by 1.28 million acres on average

The 2021 report surprised the industry by reporting intended acreage of corn and soybeans below expectations

The USDA Prospective Plantings release is the first major report of the year for U.S. corn, soybeans and other principal crops. The report represents a record of national planting intentions for the upcoming crop year prior to planting. Producers look to the March 31 results of a farm operator survey as a gauge for how they might expect to market their crop for the year. In 2021, 78,900 farm operators in 48 states were surveyed to provide data.

The USDA returns to identical metrics of acreage by crop and region in its Acreage report, which is generally published on the last business day of June (June 30 this year). While Prospective Plantings reports the planting aims of the nation’s farmers, Acreage reveals the acreage planted and serves as a proxy for how well Prospective Plantings reflects the crop year’s observed seeded acreage.

Reliability of Prospective Plantings Acreage Estimates

Reliability of Prospective Plantings Acreage Estimates Source: USDA

The table above shows the reliability of the Prospective Plantings reports over the last 20 years, comparing the intentions espoused in Prospective Plantings to the ultimately planted acreage for the crop year.

Barley, for example, has a 90% confidence interval of 13.5%, meaning that 90% of intended Barley acreages, as published in Prospective Plantings, fall within 13.5% (plus or minus) of observed Barley acreage over the past 20 years. Corn has among the lowest 90% confidence interval, indicating a high degree of accuracy of Prospective Plantings corn acreage relative to other crops.

On average, over the past 20 years, Prospective Plantings has published an intended acreage for corn that differs from observed acreage by 1.28 million acres. Of the past 20 Prospective Plantings reports, nine have underestimated corn acreage and 11 have overestimated corn acreage. Prospective Plantings acreage was within one million acres of observed planting only twice in the last decade, in 2017 and 2019. Durum wheat, with a 90% confidence interval of 37.3%, is the worst forecasted by Prospective Plantings.

Impact of the 2021 Report

The 2021 Prospective Plantings report revealed increased national acreage for corn, soy, and wheat compared to observed planted acreage in 2020. Corn was expected to have increased by under 1% in 2020 to 91.1 million acres, soybeans by 5% to 87.6 million acres, and all wheat by 5% to 46.4 million acres.

The report nonetheless surprised the industry as the intended acreage for corn and soybeans was still below expectations. Polling had priced in expected corn acreage of 93.2 million acres, or 2.1 million acres more than was published in Prospective Plantings. The report for soybeans similarly missed the polling expectation.

As a result of lower-than-expected intended acreage as published in Prospective Plantings, both new-crop Corn (December 2021) and Soybean (November 2021) futures closed limit up on the March 31, 2021 trade date. The chart below shows new crop December 2021 Corn futures closing limit up (+25 cents), a 5.52% price increase, on that date, and continuing a bull market thereafter.

December 2021 Corn Surrounding March 31, 2021 Prospective Plantings

Acreage and Its Discontents

While the nation’s farmers reeled from a “wild” 2021 Prospective Plantings, the June 30, 2021 release of the Acreage brought more surprises, sending corn and soybean prices surging again after a volatile June. The report was expected to account for the planting that market watchers perceived Prospective Plantings to have missed, upping planted corn to 93.8 million acres and soybeans to 89 million acres according to Reuters polling. Although Acreage represented an increase in planted farmland relative to the intentions espoused in Prospective Plantings, market expectations exceeded observed acres planted by more than 1 million acres for both corn and soybeans.

Prospective Plantings 2022

Anticipation is always high around Prospective Plantings. With so many risks influencing the market, that is especially true in 2022. Many market watchers believe that commodity prices favorable to farmers will support increased acreage, yet farmers will have to contend with the headwind of high input costs and an uncertain interest rate environment.