USDA's 2009 Prospective Plantings Report in Line with IHS Global Insight Expectations

If there are any true surprises in the report, they might be the cotton planting intentions of 8.8-million acres (down less than expected) and a slew of sizable percentage increases in smaller-acreage crops such as dry beans, dry peas, lentils, flax, and sugar beets. To the downside, peanuts took a big hit, and California crops such as short- and medium-grain rice and Pima cotton dropped considerably because of water shortages.

IHS Global Insight expected a contraction in total acreage from 2008 to 2009 because of a few significant factors. The drop in soft red winter wheat acreage in the Midwest means that the 2008 double-crop soybeans become the 2009 full-season soybeans, but the net impact is a loss of total acreage, possibly 2-million acres. A second source of lower acreage is the dramatic weakness in commodity prices and the loss of hard red wheat acreage, both winter and spring. Historically, when we lose acreage in these areas, the acres do not shift one-for-one into other crops; some move into fallow as a management practice. Depending on how the weather plays out over the next couple of weeks, we could see increased fallow acreage in North Dakota because of excessive moisture (i.e., flooding) rather than dry weather. Consistent with the typical loss of acreage experienced when wheat prices are weak, the sum of the acreage for individual crops reported in the March "Prospective Plantings" report is about 1-million acres lower each for Texas and North Dakota. Another source of lost acreage in 2009 is California because of its water crises. While the loss in California acreage will be felt across many crops not covered in the March report (fruits and vegetables), the loss reported in corn, wheat, cotton, and rice totals nearly 400,000 acres.

Where is the upside? If the flooding along the Red River quickly resolves itself, we might see a larger soybean number in North Dakota, and for that matter we might see more soybeans in Texas. While Texas is not a typical soybean state, its heavy reliance on cereal crops such as wheat, sorghum, and corn, along with its large cotton area decline, seems to create an opportunity for more soybeans. Even if Texas doubled its acreage in soybeans, it would not be a huge number. Over the past year, the price relationship between corn and sorghum has moved such that sorghum prices are considerably weaker than corn. This price movement, along with the absolute drop in corn prices, has caused Texas growers to reduce sorghum acreage dramatically.