This week Farm Futures Magazine released their 2022 United States Planting intentions. Normally when I see these numbers, I look at it like the guy who is putting out next years mock draftthe day after this years draft is done. As I thought more about this, there is probably more thought that goes into the survey responses then the guys picking next years draft order way too early.
First lets take a look at the numbers. According to Farm Futures Survey Corn plantings will be up 1.7% from the USDAs estimate at 94.3 million acres. Soybean acres were pegged at 90.8 million acres which would be an increase of 3.7%. Finally, Wheat acres came in at 49.7 million acres which would be a 6.3% increase. That is a total acre increase of 11.7% from USDAs 2021 estimate, which can be enough for people to scratch their head, but lets take a look at how people go about making these decisions.
In my opinion there are three major factors that play into acre decisions. What the ultimate goal of the operation is, what are the economics of growing one crop vs. another, and finally the weather.
Operation
Every operation in the United States is different. Different in terms of size, location, and the ultimate goal. A dairy farmer in Iowa is going to make their decisions differently then a row crop farmer from Indiana, and both of them are going to make their decisions differently then a cattle feeder in Oklahoma.
If the majority of your operation is livestock driven, the largest thing you need to account for is how are you going to feed said livestock. If you finish out cattle in Iowa, chances are you arent going to plant any acres to canola, because it just doesnt make sense. That would be equivalent to when Kevin Costner famously plowed under his corn crop in order to build a baseball field. Unfortunately for most farmers, they dont have the backing of Fox to make such a foolish decision. Chances are if you are finishing cattle, you have a lot of corn-on-corn acres and some hay, and probably a few beans depending on how many acres you have, because you can always grow feed cheaper then you can buy it.
Additionally, if you are a row crop farmer in the state of Illinois and the majority of your acers are sitting under a pivot you may lean a little heavier corn-on-corn then a dry ground farmer, because you know that you can get the moisture to the crop, regardless of what the weather provides.
What is best for one operation might not be best for the guy down the street, it all depends on what the ultimate goal is.
Economics
Believe it or not, most farmers are in the business of making money. The next factor that can play into acre decisions is the sheer economics of growing one crop vs. another. For the below Break-Even Tables Inputs were figured by the Iowa State University Break Even Calculators and the Revenue was figured by a local co-ops New Crop 2022 bid. Keep in mind that a lot of this is a moving target, which lends itself to change.
After spending some time looking at the numbers, Soybeans provide a little more room for errormiddle of the road crops should profit more then corn and an above average crop doesnt have a major drop off from Soybeans to corn.
Finally, this is why you can see a bounce in the corn and or the soybeans in early spring because they are competing with one another to Buy Acres.
Weather
To write an article about acreage decisions without mentioning weather would simply be foolish. Read an article or listen to market commentary in the Spring, Summer, or the Fall and it wont take long to hear a discussion about the fact we are in a weather market. In the spring people will talk about planting delays, in the summer the discussion will circle around hot & dry weather, or an abundance of moisture. In the fall there is generally talk of harvest delays. Most of the time these discussions and ensuing market moves are inflated, but not always. Fact of the matter remains that generally the crop will get in the ground and come out of the ground, there just might be some bumps in the road along the way. As for growing season weather, it is mostly speculation until the combines begin to roll.
There can be some weather delays that have a serious impact on acreage decisions. If a farmer has ground along the river and it floods in early spring and doesnt dry out until the middle of June, they might have planned on planting corn on that piece of ground, but the timing simply wont allow it, so those acres will be switch to beans.
As we discussed earlier there is no one approach that is right for every operation. Take into consideration a farmer in Northern Iowa in comparison to a farmer in Southern Kansas. The farmer in Southern Kansas will be much more apt to re-plant later in the year then the farmer in Northern Iowa simply because their climate will allow them to do so, less risk of frost and freezing before the crop is mature.
Balance Sheet Impact
Lets assume for a minute that Farm Futures hit the nail right on the head with their survey, they were able to gather the perfect sampling and this is in-fact what the United States plants for the 2022 crop year, what impact will that have on the domestic balance sheets.
When looking at the corn balance sheet using the survey acres is does increase next years carryout, but it is still below 2 billion Bushel, which makes it manageable. Domestically we cant afford any major production hiccups.
The soybean picture is similar to corn even a robust yield will not leave us with a glut of Soybeans.
From a Stocks/Use ratio standpoint the wheat proves to have the largest drop off given the numbers provided. Wheat is by far and away the most global of the three crops, so any major production issues in the various countries that produce wheat could have a significant impact on the United States Exports and really provide a tight balance sheet.
As for now these numbers will get little attention from the market place, as the market is primarily concerned with this years harvest and the situation in the gulf. Just like the fact that Spencer Rattler from Oklahoma is projected to go number one to the Houston Texans, I am sure that is the last thing on the Texans, Oklahoma, or Spencer Rattlers mind it still provides for an interesting discussion as to what impact these projections and decisions could have.
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David Ericson
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