This season’s unprecedented planting delays have led to much debate, criticism, and price volatility surrounding the US corn and soybean crops. This week, the USDA Farm Service Agency (FSA) sought to alleviate some of the confusion by issuing an update to its 2019 acreage data, a few weeks before the typical monthly frequency of updates.
Market uncertainty peaked with the release on Aug. 12 of the USDA’s WASDE report that caught the market wrong-footed and resulted in a limit down loss of 6% in corn futures prices. Confusion over the numbers added to a stressful season for farmers dealing with several years of low revenue and an ongoing trade war with China on top of nearly 20 million acres of cropland prevented from being planted due to record precipitation in the Midwest.
In aiming to clarify things, the FSA on Aug. 27 also issued a document detailing the relationship of FSA and NASS data, background on methodology, and insights on the 2019 data.
The chart illustrates the relationship between NASS and FSA acreage. The historic relationship suggests the current gap should close a bit. But it also suggests that final NASS planted area for corn will remain well above what the market had been expecting prior to the Aug. 12 WASDE report.
Here are some of the key takeaways of the FSA announcement and what they will likely mean for future USDA data releases.
Much of the agriculture industry was focused on the record area prevented from planting. Gro even designed a model to predict corn and soybean prevent plant. All farmers participating in USDA farm programs are required to report acreage planted, volunteered, failed, prevented, and not planted to the FSA.
NASS uses the FSA when updating its estimate for planted area, but it is important to note that NASS does not have a corresponding category for prevented acres and only considers planted plus failed area. The annual Acreage report issued on June 30 was impaired by the delayed planting, and NASS subsequently resurveyed 14 states, which covered the majority of planted area. The August update to NASS’ planted area estimate for corn and soybeans considered the FSA planted and failed data and the farmer resurveys along with satellite imagery. Corn area reported by NASS was much higher than market participants were expecting, but a closer examination shows the current estimates are likely to be pretty close to the final area.
It is important to examine the relationship between the FSA planted and failed statistics and NASS planted acreage. Not all farmers participate in USDA farm programs, therefore NASS acreage will be consistently larger than FSA planted and failed. On average FSA final planted and failed area for corn is 96.8% of NASS final area. The current FSA area is 96.3% of the current NASS estimate of 90.0 million acres. In absolute terms the average difference is 2.92 million acres, compared with the 2019 difference of 3.31 million acres. This leaves a gap of 450,000 to 580,000 acres, depending on the method of calculation used.
Another important thing to consider is that FSA reported acreage will likely increase further as all farmers reports get collected. In the Aug, 27 update, corn planted plus failed area increased 800,000 acres. NASS typically makes another adjustment to its planted area forecast in the October Crop Production report based on a more complete FSA data set. It is possible NASS’ estimate could be lowered, but as the above analysis shows, the decline will be limited.
A similar analysis for soybeans shows the current FSA planted and failed at 97.5% of NASS’ estimate of 76.7 million acres, compared to an average of 98.3%. In absolute terms, the current difference is 1.91 million acres compared to an average of 1.32 million. The FSA update added almost 800,000 planted and failed acres. Further increases in FSA area could close the gap to its historical average or NASS may slightly reduce its estimate in a future Crop Production report.
Another thing to note from the report is a roughly 2 million-acre increase in area planted to cover crops. Due to the severe planting delays and prevented area there was a policy change that allowed farmers to receive a full payout on prevented acres if the replacement cover crop was hayed or grazed after Sept. 1, earlier than the typical cutoff date of Nov. 1. Since the Market Facilitation Program (MFP) pays out $15 per acre for cover crops, farmers additional incentivizes to plant. As a result, cover crop planted area is up 120% from last year.