Bare Knuckles Ag ™

Unraveling USDA corn numbers so bearish they “can’t be right”

USDA’s August corn crop estimate was stunningly bearish. Pre-release trade estimates of acreage planted had ranged from 83.5 million to 89.8 million; but it came in at 90 million. Estimates for average yield ranged from 161.0 to 167.2 bu. per acre and it came in at 169.5 bu. per acre, up another 3.5 bu. from USDA’s July estimate!

Then, USDA’s Risk Management Agency (RMA) made it a “trifecta” of baffling numbers by reporting farmers had filed “prevented planting” claims on an additional 11.2 million corn acres. Add the acres planted to claims farmers filed for “prevented planting” payments and it adds up to 101.2 million acres. That’s 8.4 million beyond the 92.8 million “intended” for corn in USDA’s Mar. 1 Prospective Plantings report.  The explanation for how this could be quickly gets into the weeds, co-mingling the planted and prevent-plant data for both corn and soybeans, so I won’t go there.

What matters is what history tells us regarding the trend in key corn metrics going forward in years like this, when the crop got planted so late over so large an area. This bar graph shows how serious the planting delays were as of May 10 – among the five most tardy in nearly 40 years, encased in red brackets below:

I focused my research on those prior four delayed-planting years: 1984-85, 1993-94, 1995-96 and 2013-14. Here’s what I found for the changes in key metrics from the August WASDE in those years to the following January WASDE with “final” crop size estimates factored into the supply-demand balance sheets:

A) Planted acreage was revised lower by an average of 0.68%, ranging from no change in ’84 to a 2-million-acre reduction in 2013.

B) Percent of planted acreage harvested for grain actually rose an average of 0.3%, but ranged from a 1% increase in ’84 to a 1% decline in ’93.

C) Yield estimates declined an average of 4.9% (5.6 bu. per acre) ranging from a 15.3 bu. per acre decline in 1993-94 to a 2.3 bushel increase in 2013-14. The latter is an aberration, however, stemming from the 2-million-acre downward revision in acres planted. Declines in final crop size are more relevant.

D) Final crop size was lowered an average of 6.1%, ranging from at 14.5% decline from August to January in 1993-94 to a 1.2% increase in 2013-14.

BOTTOM LINE: Historically, odds strongly favor a shrinking corn crop estimate.

If we just use the “averages” of the prior four years where planting was this late, this is what happens between the August WASDE and next January’s “final” crop estimate:

A) Planted acreage would drop by 600,000 acres, to 89.4 million.

B) Percent harvested would rise by 0.3%, but still decline by 300,000 acres (to 81.7 million) due to the expected decline in acres planted.

C) Crop size would decline by 6.1%, to 13.053 billion, 848 million bu. smaller with an average yield of 159.8 bu. per acre.

KEY TAKEAWAY: This market has just absorbed the most bearish WASDE report for corn we’re likely to see through harvest, based on past history of extreme late planting years. Throw in vulnerability to early frost and weak prices now favor buying, not selling.

Dan Manternach, President

Perfect Fit Presentations, LLC

www.perfectfitpresentations.com

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