By Adam Graves, Global Risk Management Inc.

Now that the market has had ample time to digest the 3/31 USDA Prospective Plantings report and corn and soybean plantings are in their early stages, it was thought prudent to briefly revisit the recent Global Risk Management study on how the SX/CZ ratio impacts planted acreage as well as make some educated, statistically aided speculation about where the corn and soybean acreage figures could go from here.

To refresh some memories, in the March 31 report the USDA projected 2021 corn acreage at 91.1 million acres and soybean acreage at 87.6 million acres. As fundamentals pointed to stronger than released acreages, the USDA surprised the market with a corn acres figure that was below the lowest trade estimate as well as a soy acreage on the lower end of expectations. In fact, this report yielded the second largest shortfall in these figures relative to expectations in history. Analyst expectations were for 93.2 mil. ac. and 90.0 mil. ac. for corn and soybeans respectively. Should the USDA reported projections materialize, corn acres would be up less than 1% from 2020 while soybean acres would be up 5%. With grain prices reaching multi-year highs and the US balance sheets for corn and soybeans looking historically tight, there was much speculation about just how much acreage would be available, and the report ultimately disappointed.

As for the GRM study using the SX/CZ ratio that projected acreages at 89.2 for corn and 86.7 for soybeans, these values came in only 2% and 1% different than the USDA’s reported projections – pretty decent for a study that yielded only loose correlations between the price ratio and acreages. That said, early acreage estimates had pegged areas for both commodities to be in the 90+ mil. ac. so it was not particularly shocking to see a divergence from the ratio study’s figures and ultimately see USDA’s projections exceed those that the study produced.

There is a big question that remains, though: where does acreage go from here? Well, given the current tight stocks situation that reflects a need for essentially a perfect growing season for supplies to keep up with demand, as well as corn and soybean futures at multi-year highs, intuition would point towards actual planted acreage exceeding the USDA projections. Furthermore, and knowing the prior facts, several core growing states (IL, IN, OH, IA, MO, NE) were projected to have unchanged or lower aggregated corn and soybean acreages; that appears illogical in the current environment.

All said, signs point towards more acreage – but how much more acreage? Looking back at actual planted acreages since the crop year started 1999, acreages have moved upward in 50% of years. Aggregated corn and soy acreages peaked in 2017 at 180.4 mil. acres. The USDA projections would put total corn + soy acres at 178.7 mil. acres, so a substantial jump might be a bit farfetched. Moreover, acreages simply have not shifted significantly between the USDA 3/31 projection and what actually goes into the ground. The biggest jump between 3/31 projections and actual occurred in 2012 when there was a 4.7 mil. acre jump, but the average increase in years where acreages rise is a more muted 1.6 mil. acres and the median increase is only 1.1 mil. acres in years where acreage expands.

So, to conclude, there is certainly a historical backing for acreage to increase from the 3/31 USDA projections – this has happened in half of years dating back to the crop year started in 1999. That said, the potential appears limited at face value with the USDA projection for 178.7 mil. total corn and soy acres relatively close to the peak aggregated acreage figure of 180.4 mil. acres. Under the assumption that acreage will see an increase, as fundamentals and futures prices would currently point to, the median year would only see combined acreage rise 1.1 mil. acres. Weather will certainly play a role as well, with nearly perfect conditions needed to aid production and help ease the tight stocks/use situation. It will be interesting to see if there are any early changes when the USDA releases their initial 21/22 forecasts in the upcoming WASDE report on May 12, though the market will likely have to wait until the June quarterly acreage report for greater certainty and clarity around planted acreages of corn and beans.

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