What is in this article?:
- Crop acreage increase expected in 2012
- Reflect changing demand prospects
While the markets will continue to reflect changing demand prospects for the 2011 crop, the potential size of the 2012 U.S. crops will also begin to have more influence as the new calendar year begins.
Reflect changing demand prospects
“While the markets will continue to reflect changing demand prospects for the 2011 crop, the potential size of the 2012 U.S. crops will also begin to have more influence as the new calendar year begins,” he said.
Prospects for the 2012 crop begin with expectations about planted and harvested acreage for all crops and for individual crops. Anticipating total planted acreage is made difficult by the fact that planted acreage varies considerably from year to year.
“In general, an increase in total acreage is expected next year due to the large area of prevented plantings in 2011. The USDA’s Farm Service Agency reports 9.6 million acres of prevented plantings in 2011, up from 6.9 million in 2009 and 4.2 million in 2008,” Good said.
However, the change in prevented plantings is not closely correlated to the change in planted acreage.
“The USDA’s National Agricultural Statistics Service estimates that planted acreage of all crops increased by 1.4 million acres in 2011 even though prevented plantings increased by 2.7 million acres. Harvested acreage of hay declined by 2.26 million, so that total crop acreage declined by only 860,000 acres,” Good said.
Another reason to expect an increase in crop acreage in 2012 is the net decline of 1.6 million acres enrolled in the Conservation Reserve Program in 2011. It is not clear how much of that acreage will be planted in the fall of 2011 or spring of 2012, but some of that acreage will likely come back into crop production.
In addition to an increase in planted acreage in 2012, it is generally expected that a larger percentage of the acreage will be harvested in 2012 than in 2011.
“While harvested acreage estimates for corn and sorghum silage have not yet been made, it appears unharvested acreage of all crops in 2011 was nearly 9 million acres larger than in 2010 and 3 million acres larger than in 2009. Most of the year-over-year increase in abandoned acres was for area planted to wheat and cotton, reflecting the widespread drought conditions in the Southwest,” Good said.
The economist said that a case can be made for a large increase in harvested crop acreage in 2012 compared to harvested acreage in 2011. “The magnitude of the increase will be influenced by planting and growing-season weather. The ongoing drought conditions in the Southwest and expanding dry conditions in the western Corn Belt underscore the uncertainty about 2012 production prospects.”
In addition to total acreage, the market will continue to form expectations about acreage of individual crops. Currently, futures prices for the 2012 corn crop are 35 to 45 cents lower than prices for the 2011 crop. Futures prices for the 2012 soybean crop are 10 to 25 cents higher than the prices for the 2011 crop.
“The price structure implies that an increase in U.S. corn production is expected in 2012. That increase is expected to begin with an increase in planted acreage. Acreage prospects for 2012 will unfold slowly, starting with the USDA’s Jan. 12, 2012, Winter Wheat Seedings report followed by the March 30, 2012, Prospective Plantings report,” he said.
Given the considerable uncertainty about 2011-12 marketing year consumption and 2012 production prospects, December corn futures should find some support near the early October low of $5.70, and nearby soybean futures are finding support near $11, Good added.