USDA Acreage Report Holds Some Surprises

Looking at total principal acreage, the state losing the greatest amount of acreage, both in percentage and absolute level, is North Dakota, down 2.1 million acres (9%) from 2008. A few factors help justify the loss in North Dakota: its inherent historical acreage variability, the dramatic price drop in wheat and other grains year-over-year, and the excessive rainfall and flooding experienced this spring. Arkansas is the second largest acreage-losing state, with the drop in winter wheat acreage being the primary explanation for the loss of 650,000 acres (7.8%) from last year's level. Texas lost 571,000 acres (2.5%) due to weak wheat prices and lower planting of winter wheat. Including Arkansas, many of the states showing significant percentage losses in total principal crop acreage are traditional double-cropping states in the southeast and delta regions.

The largest decline in corn area occurred in North Dakota, both in percentage and absolute decline. North Dakota farmers experienced dramatic weather-related delays during planting and shifted to soybeans and back to wheat, crops that can produce satisfactory yields despite delayed plantings and also crops that have much lower input costs. By mid-May, North Dakota farmers were more than 50% behind their normal planting pace. If weather had cooperated, the normal drivers that cause farmers to allocate acreage toward one crop versus another favored corn, given the high yields experienced in 2008. California lost 120,000 acres due to water constraints. Most of the major Midwestern states reported modest increases in corn planting despite the expectation of weather-related shifting into soybeans. Georgia's corn acreage jumped by 80,000 acres (22%) to 450,000 acres, likely the result of shifting out of peanuts. For the United States as a whole, peanut acreage is down 438,000 acres (29%). Also included in the report is the share of corn acres planted to certain biotechnology traits. Acreage of insect resistant-only corn was flat at 17% and herbicide resistant-only was down 1% at 22%, while stacked-trait corn area was up 6% at 46%. The net of all types of corn biotech trait acreage was up 5% to 85%.

Soybean plantings are expected to increase by nearly 1.8 million acres (2.3%) to 76.5 million acres. The largest state level acreage shift occurred in Nebraska, with a 400,000 acre (8%) decline from their 2008 level. Nebraska farmers appear to have gone heavy on corn planting, up 600,000 acres, as last year's yields came in strong for corn and relatively weak for soybeans. Across the Midwest, soybean plantings were mostly in line with last year's level, but moving to the South and Delta regions, planting levels increased at the expense of peanuts and to a lesser extent cotton. Soybeans planted following another crop dropped from 9% past year, the highest level in many years, to 6%. The large drop in double crop soybeans is mostly the result of lower winter wheat plantings rather than reduced soybean acreage. The use of biotech seeds in soybeans has matured as the use of herbicide resistant seed fell from 92% in 2008 to 91% in 2009.

Rice has been the commodity holding the greatest price strength the longest. Interestingly, the June acreage level came in only marginally above the 2008 actual level despite the 6% increase put forth in the March report. Also interesting is the fact that California's acres are reported above last year despite their water use issues in the state. In the March report, California rice area was estimated at 477,000 acres, while in the June report the level came in at 562,000, up from 519,000 acres in 2008. Rice area declined significantly in Louisiana, but other states held their area about flat.

Cotton area is estimated to have fallen to 9,05 million acres, down from 9.47 million acres in 2008. The decline includes a continued slide in American Pima cotton, where California reduced their acreage by 15,000 acres to 130,000. While many of the Delta and southeastern states saw considerable reductions in cotton plantings, Texas, the largest producing state, held planted acreage nearly flat at 4.9 million acres.