Crop Reporting

The writer for the DTN Market Report gave some good food for thought yesterday.

"USDA's wildly optimistic planted-acreage report for corn has turned markets upside down, and spawned an avalanche of tweets, blogs, wire articles, etc. Even though no one believes the 92.3-million-acre figure for a minute, the market plummeted yesterday and is down the limit this morning. But before you conclude, as some bloggers have, that USDA purposely made up numbers to cause corn prices to drop, please consider the agency's procedures and resulting constraints.

IIWII (It is what it is). That's the rule at the National Ag Statistics Service (NASS). Its procedures are clearly spelled out and it follows the same procedures every time. He explained that the question asked in early June was how many acres had been or would be planted to various crops. "I don't understand why the trade would be so skeptical of corn acreage, yet apparently accepts the soybean and wheat acreage figures. Farmers were asked the same questions about all crops. The procedures were identical."

Furthermore, NASS does not adjust the results of the survey. "We report what the farmers tell us," Prusacki says. "When I first saw the data this time, I thought 'Wow. This is going to be a surprise,'" he said. "We went over everything with a fine-tooth comb. We were still looking at the data at 4 a.m."

If you look at the aggregate principal crop acres, you can see by state that the results don't look too weird, Prusacki added. "For example, North Dakota is way down from last year and from intentions. On the other hand, if we look the corn data for Nebraska and Iowa, which were able to plant quickly, they are up."

Are the surveys perfect? Of course not -- statistics never are perfect. This year's flooding highlights one of the ways the historic procedures fall short.

USDA is trying to remedy that by re-surveying areas where it appears planting did not take place. In July, NASS will collect updated information on corn, soybeans, Durum and other spring wheat plantings in Minnesota, Montana, North Dakota and South Dakota. DTN asked NASS Director Joe Prusacki how they chose those states and why they are not going to re-survey states such as Ohio.

"So we looked at planting progress, and we talked with our field offices where we thought there might be acres that didn't get planted," he explained. "There was no evidence in Ohio and the states such as Arkansas, Missouri, Illinois, Kentucky or Tennessee, where flooding has occurred that acres failed to be planted. Since our survey in early June, weather in the eastern Corn Belt has been pretty good and farmers made a lot of progress. Our staff in those states didn't feel there would be many acres not planted as planned."

"Yes, there are acres that were planted that now are under water," Prusacki said. "We know there is flooding in Iowa, where the crop went in in a timely manner. But Iowa planted almost 25,000,000 acres of principal crops; almost 14,000,000 of corn. How much is flooded? Probably not a million. Probably not 500,000. One-hundred thousand? As a percent, is that going to have a significant impact on the state's crops?"

Harvested acres can be adjusted in any crop production report, added Lance Honig, chief of the crops branch at NASS. "Harvested acreage is 'open' to change anytime we publish a production forecast -- i.e. beginning in August," he said.

The re-survey will go back to farmers who still had crop left to be planted in the early-June survey period. It will ask both what has been planted and it will ask farmers how many acres they plan to harvest, Prusacki said.

Trade expectations aren't always based on the goals and procedures of USDA's reports -- understanding what they do and don't do may explain some of the discrepancies and surprises in the market."

We had all the flooding news this spring, preventive planting acres, late acres planted in Ohio to the point no one agrees how many acres there are this year or how good it is. There is stress from too much water in many areas, burned out drought in others and storms that caused the damage like the pictures we have seen in the news on TV, email and Internet.

It's all over the board. So, even with all this technology we live in a very vulnerable world with a marketplace that reflects that fact. Large demand, weak economy and wild weather swings have really made farming and just living day to day a challenge.

As usual, I hope we meet the challenge!

Ed