Scott Irwin Profile picture
Sep 11, 2020 17 tweets 5 min read Read on X
1. Implications of FSA Sep acreage totals for corn and soybeans planted acreage. I am simply updating tables found in this recent #FDD article: farmdocdaily.illinois.edu/2020/08/using-…
2. Given the reported FSA Sep 1 totals, have to make an assumption about the completeness of reporting and % of acres enrolled in FSA programs. The latter is very stable over time so pretty easy. The kicker is the completeness of reporting. We knew it was way behind in Aug.
3. I make two assumptions about completeness of FSA reporting. In this first table I assume the reporting % for this Sep is the historical Aug avg. Just sayin a month behind. Image
4. If this is the right reporting %, then corn and soybean planted acreage this year is a million acres less than NASS June, with corn off 803k and soybeans off by 241k. Image
5. Next I assume that the Sep reporting % caught back up to the historical avg for Sep. If that is correct then NASS is too high by 2.25 million acres on corn + beans. Breakdown is 1.4 million too high on corn and 850 thousand too high on soybeans. Image
6. What does all this mean? Tells me that NASS planted acreage total for corn and soybeans is likely to come down another 1-2 million acres. Some of that will come in October but may not see the full adjustment until final estimates in January.
7. Remember that NASS adjustments based on FSA data are on top any derecho acreage adjustments. Had to get planted to get blown down!
8. If I have to choose, I will be conservative and say planted acreage for corn will come down a minimum of 850,000 acres and beans will come down a minimum of 300,000 acres.
9. Have to keep in mind the key role that reporting % plays in this analysis. If my reporting assumptions are too high then my acreage declines are too big. This table shows that Sep reporting rates of 98.2% on corn and 98.7% on soybeans exactly reconciles FSA and NASS acres. Image
10. Pretty sure any remaining uncertainty about FSA reporting rates will be resolved by October. At this point, I am confident that some kind of planted acreage reductions for corn and soybeans by NASS are coming in October.
2. Now you might ask: How did the total US crop acreage not decline in 2020 with the low crop prices? I will give you one guess. That's what tens of billions of $$ of gov't payments does for the crop sector. Image
3. Next up a different way of looking at corn and soybean planted acreage that does not rely on assumptions about FSA reporting rates. Table below shows total corn and soybean planted acreage and PP acres. One of my favorite tables in recent years. Image
4. Basic idea is that there is fairly stable total of corn and soybean planted acreage from year to year. Then check if allocations for 2020 make sense in terms of adding up. Grand totals from 2016-2019 only vary from a low of 178,7 to 181.7 million acres. Image
5. Now that we have a near census of PP acres, lets add the NASS 2020 June planted acres to PP and see what we get. NASS June estimates result in a grand total for corn and soybeans of 183.4 million planted acres. I just don't think that is realistic. Image
6. Here is what I did for an alternative estimate. I assumed that grand total for 2020 was same as 2019 at 181.7 million acres. Subtract 7.5 million acres of PP we then have 174 million to allocate to corn and soybeans. Image
7. I made corn and soybean planted acreage "fit" the 174.2 million planted total by dropping corn a million acres below NASS and soybeans by 665 thousand below NASS. So, this method yields planted acreage estimates of 91 million for corn and 83.2 million for soybeans. Image
8. Important to recognize that even if I am right that these declines in planted acreage will not have huge market impacts. And, of course, I can always be wrong!

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More from @ScottIrwinUI

Mar 20
1. I guess today is the day to talk about corn yields. Just received an email from @aaea announcing a new Choices article "A Slowdown in US Crop Yield Growth" by David Boussios. Here is the link: choicesmagazine.org/choices-magazi…
2. The author of the Choices article argues: "The statistical evidence of a productivity slowdown in crop yield growth builds each year. The linear yield growth trends since 2013 for corn, soybeans, and wheat are all statistically lower than one starting in 1988. Models, forecasts, market participants, and policy makers should consider that yields in the future will probably be lower than forecasted by the USDA and that extrapolating trends into the future without revision is problematic."
3. This argument is especially interesting because I have seen similar arguments in the grain trade in the last few years. We can all agree that the US average corn yield has been relatively flat since around 2013. That is obvious looking at a chart of corn yields. But one has to be extremely careful in then leaping to the conclusion that productivity growth in corn yields has also slowed. The reason is that runs of poor or good weather can mask the true underlying trend in small samples of years.
Read 7 tweets
Nov 1, 2023
1. Recommended Reading for the Day: Fascinating new FDD from my colleagues on the farmdoc team, led by Carl Zulauf. Long-term look at real crop prices. farmdocdaily.illinois.edu/2023/10/the-po…
2. It has long been a staple of economic thinking that real (inflation adjusted) commodity prices have a strong tendency to decline over time. Probably the most famous example of in this regard is the bet about real commodity prices between Julian Simon and Paul Ehrlich in 1980. See the details here:
3. Carl and team put together the data for a USDA index of real crop prices going back to 1912. This is the chart shown below. Lots of interesting history here, but the 30 year period of stable real crop prices that began around 1990 is unmistakable. The question is whether this is a pause in a very long run downward trend or something new.
Image
Read 8 tweets
Sep 28, 2023
1. Excited to announce that the band is back together! Actually, talked Darrel Good into coming out of retirement to work on this FDD: "The New Era of Crop Prices: A 15-Year Review." farmdocdaily.illinois.edu/2023/09/the-ne…
2. When crop prices started to take off in 2006-07, a huge question was whether this was just another spike like we had seen so many other times, or was this the beginning of a permanent jump in the level of average prices, like in 1973. Image
3. For some reason (temporary insanity?), Darrel and I decided to stick our necks out and predict that a new era in crop prices was afoot AND make specific predictions for the average price and trading range in the new era. As this chart shows, we did not have much data to go on.
Image
Read 8 tweets
Jun 1, 2023
1. Ok, I have hopefully convinced you that the RIN cliff scenario is a logical possibility. Now what are the chances of it actually happening? The first step is to estimate QM in the graph below. Turns out the proposed RVOs released by EPA last December are the place to start. Image
2. We can use the proposed RVOs to come up with a defensible estimate of the maximum demand for biomass-based diesel (BBD) for 2023, 2024, and 2025. We can do this because we know mandates are and will be binding. Image
3. I will leave the details of the computations to the article. Suffice it to say that under the EPA's preliminary rulemaking, the max amount of BBD needed is about 4BG each year. That is national demand for sum of RD and BD. Image
Read 11 tweets
Jun 1, 2023
1. Ok, had to take a brief pause for the cause (a meeting). Anyway, diving into the heart of the RIN cliff idea in this thread based on our latest FDD. farmdocdaily.illinois.edu/2023/05/is-the…
2. Here is how RIN pricing works when BBD production is equal to the mandated quantity. In this case, looking at an example of D4 biodiesel RIN pricing on May 4, 2023. Predicted D4 RIN price is $1.61 and actual on this date is $1.58. Pretty close. Everything A OK. Image
3. But what if for some exogenous reason, biomass-based diesel (BBD) production is pushed past the RFS mandate? This is the RIN cliff scenario. New market equilibrium is given by intersection of demand w/tax credit and fixed QRC supply of BDD. Red line becomes supply curve. Image
Read 8 tweets
Jun 1, 2023
1. Our latest FDD on the renewable diesel boom is titled "Is the U.S. Renewable Fuel Standard in Danger of Going Over a RIN Cliff?" That should get your attention this morning. It is going to take me several twitter threads to go through the highlights.

farmdocdaily.illinois.edu/2023/05/is-the…
2. In this thread, I am going to go through the first part of our analysis. Start with the very basics of binding and non-binding RFS mandates. In a standard supply/demand framework, here is a binding mandate. Image
3. A binding mandate "binds" in economic terms because the mandate volume exceeds the competitive market equilibrium quanitity. To get the higher than equilibrium Q produced, producers have to be offered a higher price and consumers a lower price. Image
Read 9 tweets

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