Analysis: WASDE/USDA

USDA Outlook Forum Acreage Estimates

Feb 22, 3:02 pm | Corn, Soybeans, WASDE/USDA, Wheat

4The USDA offered their best guess at US planted acreage estimates for 2018 today, at the annual Agriculture Outlook Forum. Combined seedings of the 4 principle crops: corn, soybeans, wheat, and cotton were estimated at 239.8 Mil acres, or 900,000 acres more from 2017. Corn and soybean acreage were each estimated at 90 Mil acres each, or 200,000 acres lower on corn and down 100,000 acres for soybeans. Wheat acres were estimated 500,000 more than a year ago at 46.5 Mil acres, while the most significant change was a 5% increase in cotton acres to a 7 year high of 13.3 Mil acres.

  The chart plots the historical changes in the 4 acreage from the Outlook Forum to the March Prospective Plantings report. The Forum began incorporating cotton in 2005, which greatly improved the accuracy of their total crop forecast. It’s worth noting that in the last 5 years, the Outlook Forum 4 crop acreage estimate has been below the survey based March Prospective Plantings report. But on average, the Forum estimate has been within 1 Mil acres or 0.4% of the March acreage report.

5While the USDA has done a fairly decent job estimating total acreage of the 4 principle crops, (relative to the March Prospective Plantings report), there is increased variability of the distribution of acres. The biggest changes tend to occur in corn and soybeans. In the last 13 years, corn acres have on average been within 1.5 Mil acres of the Forum. In 6 years acreage was larger by an average of 1.7 Mil acres, in 6 years they were lower by an average of 1.4 Mil acres, and in 2017 acreage was unchanged. The chart shows that changes in corn and soybean acres are closely related, with soybean changes being nearly inversely related to corn. There was only 1 year (2009) in which both corn and soybean acres both declined, and just 1 year (2015) when corn and soybean acres both increased. A year ago, March corn acres were equal to the Forum estimate, while soybean acres were 1.5 Mil acres larger.

6Compared to final US acreage totals, the Outlook Forum estimates are less accurate than the March Prospective Plantings report. What farmers intend to do in March versus what they actually do is often influenced by a number of factors, including planting season weather and fluctuations in market price. In the last 13 years, the combined crop acreage totals have been larger in 5 years by an average of 3.3 Mil acres, and smaller in 8 years by an average of 1.8 Mil acres. In 2017, final acres were 3.4 Mil acres larger, due to more soybean and cotton acres. The average difference across all years has been 2.4 Mil acres. Again, the greatest changes have been realized in corn and soybeans, but the relationship between the 2 has been less precise than in the March report due to larger changes in wheat/cotton, which both tend to decline. Planting season weather in the upcoming weeks will ultimately determine how Central US acres be shuffled. But as the last few years have shown.  

US Farms and Land in Farms

Feb 20, 3:22 pm | Biofuels, Corn, Soybeans, WASDE/USDA, Wheat

4On Friday, NASS released it’s annual Farms and Land in Farms report. The data is collected in during the June Agriculture Survey, and NASS defines a farm as “any place from which $1,000 or more of agriculture products were produced and sold, or normally would have been sold during the year”. Additionally, acreage enrolled in CRP or WRP are included.

  2005 is generally considered to have been the start of the “biofuel era”, while the impact on farm gate commodity prices began to emerge in 2007/08. But in spite of higher commodity prices, the chart shows a fairly consistent trend of consolidation that has developed across agriculture over the last decade. An aging population, along with high operating costs has led to fewer farms, with increasing average acres. NASS counted 2.05 million farms in the 2017 survey, down 12,000 from 2016, but a decline of 156,950 (7%) from 2007. The average farm size was 444 acres 2 acres more than in 2016, and 26 acres (6%) larger than a decade ago.

5In addition to surveying the number of farms and size of farms, NASS reports data by sales class, which includes sales of agriculture products and government payments. The survey that took place in June of 2017, asks respondents to report the value of sales for the calendar year of 2016. Sales class breaks are at $10,000, $100,000, $250,000, $500,000, and $1,000,000.

  By the numbers, nearly 50% of all farms realized farm revenue of less than $10,000, but compared to a decade ago, this was the segment of agriculture that had declined the most. Compared to 2007, there were 206,550 fewer (-17%) small farms. There were 2% more farms with revenue of $10-99,000, while there was 3% fewer farms with revenue of $100-249,000. The most significant increase over the last decade has been in the number of farms generating $500,000 or more. In 2007, there were just over 120,000 farms in that class, and in 2017 there were nearly 165,000 – a 37% increase!

6In addition to NASS’s Farms and Farmland report, the Chicago Federal Reserve released their quarterly Ag Letter. The report includes an update on the 7th District (IL, IN, IA, and WI) farmland values, as well as updates on current farm credit conditions. The report is based on a survey of agriculture banks across the district, and showed values for good farmland in the 4th quarter were on average up 1% year over year, marking the 1st increase since 2013. Versus the 4th quarter of 2016, the largest increase in farmland was in IA, which was up 3%, while farmland in IN and WI increased 2% each. IL was the only state that was lower, with a 1% decline. 75% of agriculture bankers reported that they expected farmland values to remain stable through the first quarter of 2018, as inventory remained tight, while both farmers and investors were showing interest in securing farmland.

Crop Insurance Prices and Cost of Production Estimates

Feb 13, 2:42 pm | Corn, Soybeans, WASDE/USDA

4** Corn and Soybean Insurance Prices: Spot corn futures this week have reached the best levels since last summer, while the soybean market is back testing highs that were traded in early December. The rally has largely been tied to events away from the US market, and more specifically drought stress across the Argentine corn and soybean belt. This has given producers the chance to catch up on old crop sales, but of course new crop prices are closely being watched as this month’s average will determine crop insurance revenue guarantees, and premiums. There are 10 trading days left in February, but at mid-month, the average for November soybeans is at $10.04/Bu or nearly 26 cents higher than a year ago, while the December corn average of $3.94 is more than 10 cents lower.

5** USDA Estimates Higher Corn, Lower Soybean Costs: While new crop prices this week are mixed, so too are new crop cost of production estimates. The chart plots the USDA’s historical production cost estimates, along with their best guess for 2018 that was updated in mid December. The USDA estimated an average per acre corn cost of production at $649, up $4 from 2017 and the highest in 3 years on higher seed and chemical costs. However, it’s worth noting that since the USDA estimates were published, fertilizer prices have increased significantly (C IL anhydrous up $80-100/ton), while their crop budgets estimate a 6% decline in total fertilizer costs. The USDA estimates soybean costs at $455/acre, or $6 less than a year ago. If realized this will be the first year since 2014 that per acre corn costs have increased against soybeans.

6** USDA Outlook Conference Acreage Estimates: The USDA Outlook Forum gets underway next Thursday, and the key event for the conference is the USDA’s best estimates for new crop acreage and balance sheets. Initial guidance was offered back in November, when the USDA published results of their 10 Year Baseline projections, which are used for Federal Budget purposes. The chart shows the historical changes in the Outlook estimates, from the Baseline, with a strong tendancy for soy acres to increase. In 14 out of 21 years (67%) soybean acres have increased by an average of 1.2 Mil acres, and there have been just 4 years (19%) that soybean acres have declined. In corn, acres have increased 8 years by an average of 1.1 million, declined in 6 years by an average of 1.3 million, and have been unchanged in 7 years (33%). The Baseline estimates for this year showed 91 Mil Acres each of corn and soy. Our best guess for this year is that with normal spring weather, US farmers will plant 89.5 million soybean and 88.5 million corn acres.