This year has seen few obstacles for planting as U.S. farmers have quickly gotten their corn crop planted, with only modest weather-induced delays in the eastern Corn Belt. As of Monday, May 18, USDA’s report showed 80 percent of the corn crop in the ground, which is right at the 40-year mean for this time of year.
However, planting conditions have been less than ideal for farmers in North Dakota. Battling cold and wet weather this planting season, North Dakota farmers stood at only 20 percent planted versus a long-run average of 69 percent. With the May 25 crop insurance deadline in North Dakota now behind us, it seems unlikely that a large share of that crop would have been planted at this point. But how much impact does a significantly delayed planting in North Dakota have?
To answer this question, we looked at the historical record of what North Dakota farmers said they would plant in USDA’s March survey and the final corn planting number at the end of the season. We computed the percent change to capture the increase or decrease in final acreage relative to March’s read. Then we also gathered planting progress data throughout the season to capture the effect of early or late planting and acreage changes. Finally, we also hypothesized that economics might factor into that decision. If higher wheat or soybean prices relative to corn existed in the planting season, this may make it more palatable to switch out of corn.
Here are the key results of what we found:
The chart below illustrates the last 20 years of these three measures along with our model prediction for 2020. The x-axis shows the planting pace as of the week of May 12 (more on that later), the y-axis represents the spring wheat to corn futures price at that time, and the color gradient illustrates the expected decline in acreage (red colors) or increase in acreage (yellow/green colors). The dots illustrates different years over the last 20 years.
One key finding of this was the time period that matters most for influencing acreage shifts. The optimal week that explained acreage changes most was the week of May 12, about two weeks ahead of the crop insurance deadline.
Planting progress clearly matters for these acreage changes. The critical threshold is around 45 to 55 percent planted by the week of May 12. If planting doesn’t reach that mark then cuts usually occur and the cuts are more severe the farther away from this 45 to 55 percent zone.
Do relative prices matter? Sort of. Of the two, spring wheat relative to corn had more of an impact than soybeans relative to corn. But even here, the impact is second order relative to the speed of planting. The slope of the colored gradients suggest that relatively higher spring wheat prices have some modest impact on reducing corn acreage.
Finally, for 2020 (denoted as the hollow triangle), we have relatively high spring wheat prices and a very low planting pace. These estimates would imply a 10 percent drop in North Dakota corn plantings. Even the most extreme acreage cut historically is 15 percent in North Dakota.
Based on USDA’s March survey, North Dakota’s corn plantings were estimated at 3.2 million, which would suggest about a 320,000 acre drop.
Finding ways to scale back USDA’s 97-million-acre corn number could be difficult with near ideal weather. North Dakota is the most challenging state, and even there we see likely cuts of only 300,000 to 500,000 acres. The rest of the country could see modest impacts, but the ability to draw acres below 95 million acres to be market impactful seems unlikely at this point.
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