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Evaluating USDA’s acreage pegs as US planting season rapidly approaches - Braun

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The upcoming US corn and soybean planting season has shaped up to be among the most highly anticipated ones in history due to unusually tight stockpiles and elevated prices.

 

Last week, the US Department of Agriculture tentatively slated 2021 corn and soybean plantings at 92m and 90m acres, respectively, primarily based on economic analysis. That was slightly fewer corn acres and more soy acres than the market expected, though both would be up on the year.

 

But how well do USDA’s February outlook numbers foretell the March survey-based planting estimates, or even the expectations for those planting intentions? Are they a good indicator or not?

 

Within the last two decades, intended corn acres have come within 1% of USDA’s February outlook nine times. Corn intentions were more than 1% below the outlook in seven years, though 2018 was the only instance in the latter decade.

 

Soybean acres in February have been a much poorer precursor to intentions, which landed within 1% of outlook plantings just three times in the last 20 years, most recently in 2019. But USDA lowballed soy intentions in years where the economics favoured the oilseed to a stronger degree than in previous years, such as in 2014 and 2017.

 

Even though it is well accepted that US farmers “love to plant corn,” USDA’s outlook committee might have trouble remembering that. Some of the biggest variations in both corn and soybean acres from outlook to intentions have come in the years where corn prices were higher relative to those of soybeans, something that is not the case this year.

 

USDA’s ag outlook is on a three-year streak of overcooking soybean acres versus March intentions, though last year was one of the agency’s and the market’s biggest downside corn misses in history.

 

Even though factors such as weather and prices can throw the final planting numbers well off from what farmers originally intended, the March planting report is slightly more predictive than the USDA February outlook figures. Historically, intentions come about a half-percent closer to the final on average than the outlook forecast.

 

USDA’s National Agricultural Statistics Service (NASS) will begin phoning farmers on Saturday to collect acreage data, and that survey period will conclude around March 18. The planting intentions report will be published on March 31, and planting will begin to ramp up in less than two months.

 

MARKET PERFORMANCE

 

When it comes to market predictions, recent trends can offer a reasonable idea of what might be expected headed into March 31.

 

Within the last decade, analysts’ corn planting expectations ahead of intentions have been within 1m acres of what USDA predicted in the February outlook. The biggest recent deviation was in 2017, when the trade saw corn intentions nearly 1m acres higher.

 

There is also a very slight bias for the March 31 trade guess on corn to be higher than the outlook number.

 

But there is a relatively strong tendency for the market to think farmers will report more soybean acres in March than the USDA projection in February. Since 2005, analysts predicted a smaller soybean area in the intentions report in just three years: 2007, 2011 and 2020.

 

The average expected increase in soybean acres between these two reports is nearly 1%. These trends suggest that trade ideas for corn and soybeans ahead of the March 31 plantings could easily exceed the record 182m combined acres suggested by USDA last week.

 

In terms of the March 31 trade guesses versus the actual number, the performance is mixed but there are also identifiable patterns. For example, the market has recently been overeager on soybean acres, as intentions have landed lower than the average guess in 10 of the past 12 years.

 

In the last 16 years, analysts have never in the same year under-guessed both corn and soybean acres ahead of the intentions report. They have over-guessed both in only two of the years, 2010 and 2018. In the other 14, the directional misses were opposites, meaning if the trade was too high on corn, it was too low on beans, and vice versa.

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