Initial Estimates

Late last month the USDA held their annual Outlook Forum. At the forum, they tentatively slated 2021 corn plantings at 92 million acres. This outlook is primarily based on economic analysis. It was slightly fewer corn acres than what the market expected going into the forum, and up from the 2020 final planted acreage number of 90.8 million. Other private surveys and estimates released recently align similarly with the USDA outlook number. Farm Futures conducted a survey of 806 producers late in January that estimated acres at 94.7 million. The consensus among the USDA as well as private firms seems to be that larger corn acres are coming in 2021 compared to previous years.

USDA methodology for the March Planting Intentions Report

Directly from the USDA – The acreage estimates in the March Planting intentions report are based on primarily on surveys conducted during the first two weeks of March. The March Agricultural Survey is a probability survey that includes a sample of approximately 80,000 farm operators selected from a list of producers that ensures all operations in the United States have a chance to be selected. Data from operators was collected by mail, internet, telephone, or personal interview to obtain information on crop acreage intentions for the upcoming crop year. Acreage estimates in the Prospective Plantings report will not be revised. These estimates are intended to reflect grower intentions as of the survey period. New acreage estimates will be made based on surveys conducted in June when crop acreages have been established or planting intentions are firm.

Reliability – March intentions versus final acreage number

Recent history has been an anomaly with the 2020 March estimate coming in 6.2 million acres above the final acreage number. The March 2019 estimate was also a historically large miss, coming in 3.1 million acres above the final 89.7 million corn acres planted in 2019. Changes between the intentions estimates and the final estimates during the past 20 years have averaged 1.3 million acres, ranging from 32,000 acres to 6.2 million acres. The prospective planting estimates have been below the final estimate 9 times and above the estimate 10 times in the past 20 years. *see Appendix*

In Conclusion

After the historically large changes from the March intentions number to the final planted acreage number over the last two years, some producers have lost what little faith they had in the USDA. Taking a step back, one can easily see the mammoth acreage misses of the last two years are historical anomalies. Over the last 20 years, the changes between the intentions estimate to the final acreage estimates have averaged just 1.3 million acres. Given the law of averages, 2021 will more than likely bring a change from the March estimate to the final estimate, somewhere closer to the 20-year average of 1.3 million acres.

While fundamentals are rather important to the market, they must always be taken with a grain of salt, given they will more than likely change from month to month. (Remember, as you may have heard around the agricultural industry before, “A known fundamental is a useless fundamental.”) A comprehensive marketing strategy should take into account all factors that play into market movement and price direction including fundamentals, managed money, and commercial end user positioning, as well as technical indicators and individual farm breakevens.

Appendix

                                                                                                            Source:  USDA

                                                                                                            Source:  USDA

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Author

Keegan Madigan