Death comes to us all. Life's but a walking shadow | In honor of Tuesday's Prospective Planting report I examined how the price received for corn influences planted acres. The ave price for the whole market year doesn't have so much correlation as you would expect since a good portion of the market year occurs after planting. However the average price received in Feb. does seem to influence farmers thinking about how many acres to plant. If you calculate the % change in Feb price from the preceding Feb and compare it to the resulting % change in planted acres the results looks like this below. In general, by eye there is a pretty good relationship between the % change in price and subsequent planted acres. It's not perfect but remember the planted acres includes any reductions due to planting weather, etc. The other fact to keep in mind is this chart is a year to year change so the actual planted acres can be cumulative as with multi-year changes in the same direction or cancel each other if a negative follows a positive (or vis-a-versa). In our case we have back to back price declines. There is some evidence as well that farmers respond differently to multi-year increases as opposed to multi-year declines as you would expect. Sometimes the increases or declines in acres seem to lag the price. For instance in 2011 we had a 59% increase in price but only a 4.25% increase in acres while the next year the price only increased 11% but acres continued to increase by over 5%. It happens the other direction as well,.
If you look at the scatter plot it is obvious that there is considerable noise which is to be expected since the period examined from 1971 to 2014 includes several subperiods in which external factors, farm programs, economic conditions, demand etc. are quite different. For instance there are periods where acres don't respond to declining prices probably due to farm program payments. It looks as though we are now operating along the red line regime but we only have a couple of data points so far. Data points for 1983 & 1984 were dropped due to extreme values caused by 24% drop in price in '82 followed by a drought in '83 and 40% increase in acres in '84.
The USDA hasn't published a monthly ave price received for Feb yet but based on the regression of past price received vs the corn futures front month it should be about $3.60 and so this calculates out to 88.5 million planted acres this spring.
It will be really interesting to see how the USDA handles corn acres tomorrow. If it is a straight survey then it will tell us something about how farmers are thinking. If, on the other hand hedge the numbers who knows.
Edited by 1234 3/30/2015 09:37
 (change in corn plt d A and change in Feb price -page-001.jpg)
 (change corn planted acres vs change in Feb price-page-001.jpg)
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 change in corn plt d A and change in Feb price -page-001.jpg (91KB - 292 downloads)
change corn planted acres vs change in Feb price-page-001.jpg (122KB - 268 downloads)
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change in corn acres vs change in price
