The Prevented Planting giant begins to waken | Michigan Farm News

The Prevented Planting giant begins to waken

Category: Crops

by David Widmar, Agricultural Economic Insights

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The best estimate for USDA’s prevented planting is 4.6 million acres; the base rate of 1.6 million plus the 3-million-acre reduction, which is based on USDA’s June WASDE report.

The USDA lowered its expectation of corn acres planted in 2019 by 3 million in June. Specifically, planted corn acres in June were estimated at 89.8 million acres – down from 92.8 million in May. With the corn acreage adjustments, we’ve seen many comments saying the USDA has estimated corn prevented planting acres at 3 million.

This isn’t the complete story.

First, the World Outlook Board assumes a baseline for prevented planting acres for its March Prospective planting report. For example, the USDA projected a normal prevented planting rate at its Outlook Forum in early 2019.

We aren’t exactly sure what the USDA projected in 2019 as a prevented planting rate for corn, but in an earlier post we found that prevented planting acres for corn has averaged 1.8% of final planted acres. This would be equal to a base rate assumption of 1.6 million acres in 2019.

This is all to say that one should never ignore the base rate for prevented planting. Our best estimate for USDA’s prevented planting is 4.6 million acres; the base rate of 1.6 million plus the 3-million-acre reduction.

This is important to keep in mind when you hear someone forecast prevented plant acres and then adjust production by that same amount. For example, a forecast of 5 million acres of prevented plant corn acres won’t likely pull corn planted acres down 5 million acres as the base rate already assumed some level of prevented planting.

Be Careful with Planting Progress Toward the End of June

The best indicator for measuring the painfully slow plant progress has been the USDA Crop Progress survey and the share of the crop planted. There is, however, a lot of confusion about these data. Based on our conversations with NASS, the intention and design of the survey could make it difficult to interpret the results at the end of the planting season.

Consider the hypothetical scenario where a state has 100 acres of corn. In a normal year, a planting progress report of 100% would imply, correctly, that all 100 acres have been planting. However, if the state only plants 80 acres but then decides to declare the other 20 acres as prevented planting (or planted to another crop), planting progress would reach 100% when the 80 acres have been planted.

This is important in 2019 as producers start to decide between planting late, planting an alternative, and prevented planting. Between survey weeks — especially toward the end of the planting season — a jump from 80% planted to 100% planted could be impacted by all three factors – not just actual plantings. This is to say a rapid jump in planting progress at the end of the planting window doesn’t necessarily mean producers got everything they intended going to corn actually planted.

Another way of looking at this is that planting progress report, in theory, should always get to 100%. The point here is to offer caution about the limitations with the tool, especially as the planting window closes.

June Acreage Report

The next big USDA report will be the June Acreage Report. This year, the report warrants careful considerations. First, it’s important to keep in mind when the surveys/interviews were completed. Specifically, ” … corn and soybean planted acreage estimates are made using data obtained from a survey of farmers conducted during the first two weeks in June.” The fate of unplanted acres during the last two weeks of June will be a blind spot for this report.

We’ve heard the USDA is currently considering a follow-up survey, especially in states with slow planting progress. These data, of course, will be available later in the summer.

What About Soybeans?

While the corn story — fewer planted acres and lower yields — started to unfold in the June WASDE, the potential impact of a wet, cool spring hasn’t been discussed much for soybeans. The USDA didn’t change planted acres or yield in the June WASDE – reasonable given the soybean growing season.

We’ve also seen a lot of balance sheets projections for soybean including scenarios for higher planted acres. The logic here typically follows the idea that some producers will shift to soybeans as the growing season gets long.

We’ve mentioned before that this doesn’t really show it’s self in the data. For one, prevented planting is usually larger for corn (1.8% of planted acres) than in soybeans (1.2% planted acres). If soybeans were truly the residual crop, you’d expect prevented planted would be less significant for corn.

We also noticed there is a strong, positive relationship between prevented planting for corn and soybeans (Figure 1). Each year, plotted in blue, shows prevented planting for corn and soybeans. Both are plotted as a share of final planted acres. Also shown in figure 1 is the average prevented plantings for corn (vertical black line) and for soybeans (horizontal black line). Notice how strong the relationship is for above/below average prevented planting across corn and soybeans. While 2009 is “on the bubble”, so to speak, there just haven’t been years where prevented planting doesn’t impact both corn and soybeans similarly.

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Figure 1. Corn average (vertical black line): 1.8%. Soybean average (horizontal black line): 1.2%. Current 2019 Estimate (vertical green line): 5.2%.

The implications of the slow, wet spring will take a while to be fully realized. While the USDA has adjusted corn acres and yields lower, expect additional adjustments to be made as the growing season continues.

It is also important to note the limitations of the reports being used to measure conditions. First, the June acreage report will have a blind spot for acres planted in the last half of June. Second, the implications of upticks in the planting progress report will be hard to comprehend as the growing season wraps up.

Finally, while the sleeping giant has started to wake up, much remains unknown about the potential impact on soybeans.

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