The much anticipated USDA Prospective Plantings and Grain Stocks reports were released this morning and contained an interesting mix of surprises. For a review of the USDA methodology for the Prospective Plantings report, see this Marketing and Outlook Brief.
For the crops included in the report of planting intentions, total planted acreage is expected to increase by 8.6 million acres from that of 2011. The overall increase in total planted acreage is consistent with strong market incentives for most crops this year. The increase was led by grains, up 6.9 million acres, hay (harvested), up 1.7 million acres, and dry beans, peas and lentils, up 1.4 million acres. Cotton and tobacco were exceptions to the across-the-board increases, with total planted acreage for these two crops down 1.6 million acres.
Even with expectations for a substantial jump in corn planted acres, the size of the reported corn planting intentions, 95.864 million acres, surprised even the most optimistic. The average trade guess before the report was near 94.5 million and the highest was around 95.7 million. If realized, the prospective corn plantings will be the largest since 1937. The largest increases are expected in North Dakota (+1.7 million), Minnesota (+600,000), Iowa (+500,000), and Nebraska (+450,000). Texas (-100,000) was the only significant producing state with fewer acres than last year.
The implication of the planted acreage estimate for the size of the 2012 crop hinges on yield expectations. Three factors are keys with regard to corn yield expectations. First, trend-yield estimates hinge on the use of long-term versus short-term data samples. Short-term samples are justified based on the view that transgenic traits have recently increased the rate of growth in corn trend yields. While there is some emerging evidence this may be the case, our view is that the effect, if true, was relatively modest and that a long-term trend yield of about 159-160 bushels for the U.S. is still the best estimate.
Second, the recent record warmth makes it likely that corn will be planted much faster than normal in 2012. The yield advantage of early planting is largely the avoidance of late planting. Our recent estimate is that early planting may add up to 2 bushels per acre to the U.S. average corn yield. Third, it has turned dry over much of the Corn Belt during the last 90 days. This has a relatively modest yield impact but the unusual recent weather conditions (85 degrees in March!) only increase the uncertainty about summer growing conditions. On balance, a yield expectation of 160 bushels for 2012 seems reasonable at the present time.