Surprises in the Prospective Plantings Report

By John D. Anderson, Senior Economist, American Farm Bureau Federation

On Friday, USDA National Agricultural Statistics Service (NASS) released the much-anticipated Prospective Plantings report. This report has always been one of the highlights on the NASS calendar, but in recent years, with very tight grain stocks, interest in the report has intensified. This year’s report was a bit of a shocker, with reported planting intentions for corn, soybeans, and wheat all diverging substantially from pre-report expectations. 

Corn planting intentions were reported at a whopping 95.9 million acres. This was about 1.2 million acres higher than the average of pre-report estimates. If realized, this would be the largest planted acres of corn since 1937, which in terms of agricultural production is, of course, ancient history. While livestock interests were naturally somewhat preoccupied with potential corn plantings, the most interesting (and surprising) number in the report was the soybean planting intentions estimate: 73.9 million acres, over half a million acres below even the lowest pre-report estimate. It was generally expected that strong soybean price performance over the past six or eight weeks would pull in some additional soybean acreage beyond the 75 million acre estimate that USDA used in the February outlook forum. With South American soybean production down fairly sharply from early projections due to adverse weather, soybean supplies could tighten considerably if plantings really do come in under 74 million acres. Wheat planting intentions were also below expectations: 55.9 million acres reported versus an average of pre-report expectations of 57.6 million acres. Winter wheat seedings were up from last year, and durum planting intentions were also higher than last year’s seedings. Other spring wheat intentions, however, were down as northern plains growers seem more inclined to go with corn or other grains. (Oat, barley, and canola planting intentions were all up considerably from 2011 levels.)

Corn plantings of 95.9 million acres would obviously have the potential to produce a bin-busting crop. Using USDA’s outlook forum trend yield estimate of 164 bushels per acre (along with normal abandonment of about 8.5%), projected corn production comes in at just under 14.4 billion bushels – a number that would eclipse the previous record production by well over a billion bushels. Still, corn prices won’t relax too much in the short run. In fact, corn futures were sharply higher following Friday’s report. Last week’s planting intentions information sets a very bullish tone for the soybean market, and this will spill over into the corn market. Just as importantly, maybe even more so, Friday’s Grain Stocks report showed stronger-than-anticipated corn offtake in the second quarter of the marketing year. Old crop carryover estimates are likely to be reduced in the upcoming supply and demand estimates report from USDA. Thus, while the planting intentions number hints at greater abundance down the road, it is a long way from being a sure thing. The sure thing right now is that old crop supplies are tight, it’s getting dry in Iowa/Minnesota, and the soybean market is red hot.

The Markets

Fed cattle prices slipped lower by about $1 last week. The bulk of business was done on Wednesday and Thursday at $125 to $126 on a live basis. The number of negotiated transactions reported for the week was down considerably from a week ago as the lower prices weren’t greeted too enthusiastically by feeders. Wholesale beef prices found no traction last week. The Choice cutout value gave ground every day last week. For the week, the Choice cutout averaged $184.65 last week, down almost $5 from the prior week. The Choice/Select spread is now just 30 cents. The spread should begin to widen seasonally about any time now. Last week’s National Feeder and Stocker Cattle Summary noted an expected seasonal component to calf markets. Heavy feeders were steady to $3 lower while light weight stockers suitable to be turned out on grass were called $4 to $8 higher. Of course, much of last week’s calf business was done before the late-week surge in corn futures and decline in feeder futures. It will be interesting to see how the market holds up in this week’s early sales.

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