A $4.8 Billion Dollar Question | Blog
Teucrium | August 21, 2020
A $4.8 Billion Dollar Question: Are there really 10 million less acres of corn and soybeans than reported on the WASDE?
Current official US Government Department of Agriculture estimates are at odds over crop acreage plantings. The discrepancy represents millions of bushels and billions of dollars.
The issue is found when comparing the acreage estimates on the World Agricultural Supply and Demand (WASDE ) report with the Farm Services Agency (FSA) acreage report. While these two data points are seldom in agreement, the discrepancy this year is wider than it has been in the last five years. The discrepancy may in part be due to the fact that FSA agents have not been conducting as many site checks this year given complications surrounding COVID-19.
Still, if the FSA numbers prove to be more accurate, an outcome we believe to be unlikely, the impact to the markets could be significant.
WASDE
In the August 12th WASDE, the USDA re-published their estimate that 92 million acres of corn and 83.3 million acres of soybean have been planted this year. Those figures, based on conditions as of August 1, 2020, remain unchanged going back to June 30th when the initial Acres Planted Estimates were released.
More importantly the harvested acres estimate also remains unchanged holding at 84 million acres for corn and 83 million acres for soybeans. The USDA reports estimates for both planted acres and harvested acres to account for issues such as crop failures. Note that production estimates are calculated by multiplying the harvested acres by the yield estimate.
Harvested acres are always less than planted acres. On average over the last five crop years approximately 92% of corn acres planted have been harvested. That figure is higher for soybeans with just about 99% of planted acres being harvested on average over the last five years.
This year’s estimates are reasonable with expected harvested acres for corn coming in at 91.3% of the planted acres and harvested acres for soybeans estimated to be 99% of the planted acres.
FSA
The FSA also reported acreage data on August 12th. The FSA figure includes acres planted as well as failed acres (planted acres where the crop has failed). The FSA data reflects numbers that are “self-reported” from farmers.
The FSA reported corn acres of 81.1 million and total soybean acres of 75.9 million, those figures are as of July 31st. Compare that to the WASDE numbers above and you quickly uncover a wide discrepancy.
A Wide Discrepancy
The discrepancy this year is as high as it has been in that last five years. On average in each of the last 5 crop years the August FSA corn acreage number has been higher than the August WASDE harvested acreage estimate by about 4%. This year the FSA acreage number is about 3.5% lower compared to the WASDE harvested acreage estimate.
For soybeans, the FSA acreage number has been lower than the WASDE harvested acreage estimate in each of the 5 last crop years. However, on average it is within 2.5%. This year the FSA number is approximately 8.5% lower.
The significance of these differences can easily be seen on the chart below. In dollar terms the combined difference amounts to approximately $4.8 billion.
Multi-billion-dollar question: Which Government figure is more accurate?
Over the last five years, on average, the corn harvested acres estimate provided in the August WASDE has been within 0.5% of the actual number. In 4 of the last 5 years the number was a slight overestimate.
Likewise, for soybeans the harvested acres estimate in the August WASDE has been within 0.7% of the actual number. Again in 4 of the last 5 years the number was a slight overestimate.
The FSA number has not been as useful in predicting actual harvested acres. Over the last five years on average the FSA number for corn has missed the mark by an average 4.5% (an overestimate in all five years). For soybeans, the FSA figure has been off by about 1.7% (an underestimate in all five years).
With the last five years as a guide it is reasonable to assume that the final harvested acre figure will more closely align with the WASDE estimate.
What if the FSA numbers are realized?
While we believe it is likely that the actual number will come in closer to the WASDE estimate, the implication of the numbers being closer to the FSA figures would be meaningful for corn and especially significant for soybeans.
If the FSA acreage numbers are realized, a development the markets do not seem to be pricing in, we would expect to see nearly 525 million bushels of corn and 376 million bushels of soybeans removed from the balance sheet.
All else being equal, corn ending stocks[1] would come back down to the 2.2 billion range where they have been for the last several years. While this move would likely be supportive for prices, we would still consider this level to represent an adequate supply.
For soybeans, the balance sheet impact would be significant. Again, all else being equal, the FSA number if realized, would result in a tightening of the soybean balance sheet, dragging the carry-out day’s supply[2] down from the current estimate of 50.1 all the way to 18.8. The soybean carry-out day’s supply has not been below a 20 day supply level since the ’15-‘16 crop year. This would be an extreme development and market prices would likely react to “ration” the demand.
Still, the USDA is currently projecting record global soybean demand this year and the Chinese are increasing their soybean purchase from the US and Brazil. Even if demand estimates were to be cut by a third, the soybean carry-out day’s supply would work out to 21.1, less than half the current estimate.
Keep It On The Radar
While we believe it is likely that the actual acreage numbers will be closer to the WASDE estimates, it is worth keeping an eye on these developments given the potential material impact on the markets.
We will be looking for any revisions in the upcoming September reports. The next WASDE and FSA reports are scheduled for will be release on September 11th.
[1] Ending Stocks (also called carry-out): The amount of a crop that will be available at the end of the crop year, given the estimated or actual beginning stocks, production and usage.
[2] Carry-out day’s supply: Ending stocks divided by demand per day