Latest / Professional Ag Marketing Podcast / Planting Progress vs Yield

Transcript

Planting Progress vs Yield · Professional Ag Marketing Podcast

• 0:01
  SPEAKER_01: Welcome to the Professional Ag Marketing Podcast.
• 0:04
  SPEAKER_01: If you want a deep dive into the ag markets and risk management strategies, your search is over.
• 0:10
  SPEAKER_01: Come here after every Friday to get your weekly commodity recap.
• 0:14
  SPEAKER_01: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 0:21
  SPEAKER_01: This is your host, Mike Miner.
• 0:22
  SPEAKER_01: Let's get started.
• 0:23
  SPEAKER_01: Today is June 7th.
• 0:25
  SPEAKER_01: Holy cow, Luke, it is June.
• 0:27
  SPEAKER_00: Yep, first week of June and uh kind of a beautiful weather week.
• 0:32
  SPEAKER_00: Finally, getting some sunny, warm, dry weather to hopefully wrap up planting and get this crap moving along.
• 0:40
  SPEAKER_01: Well, that's what we're gonna talk about today.
• 0:41
  SPEAKER_01: We're gonna talk about the uh planning progress versus yield history.
• 0:46
  SPEAKER_01: So the USDA, in their WASDI report here this next Wednesday, they take into uh calculation the planning progress as of a certain day, and then that helps determine what kind of yield number they're gonna post in this next week's WASD report.
• 1:02
  SPEAKER_01: So I'm gonna have Lucas break down what those numbers could potentially look like here in next week's report.
• 1:07
  SPEAKER_01: And uh first we're gonna start off with planning progress in general here across the Midwest and what you're seeing, Lucas, uh, to start off.
• 1:15
  SPEAKER_00: Yeah, so I I think you know, for the most part, a lot of areas are planted, right?
• 1:20
  SPEAKER_00: I the the uh uh corn soybeans have gone in fairly timely.
• 1:25
  SPEAKER_00: We've dodged a few weather uh problems and issues.
• 1:28
  SPEAKER_00: It seems like rains go through and then we race like heck to try to get some acres planted before it rains again, which probably isn't all that abnormal, uh except when you think back to the way this planting season started or where we were sitting at the end of March, first of April, when everything was dry, it was warm, it looked like it was gonna fly in, and then all of a sudden it weather flips and everything changes.
• 1:53
  SPEAKER_00: And even looking back to like last year planting, uh boy, it it really went in for the most part pretty uh pretty good, pretty fast.
• 2:02
  SPEAKER_00: And so um, you know, right now as we sit today, there still are pockets uh really around the country uh that are struggling to get the crop planted.
• 2:12
  SPEAKER_00: I mean, locally, as we sit here, um that area uh kind of east of Worthington, Minnesota, maybe stretching almost Albert Lee, down into Iowa, northern Iowa.
• 2:24
  SPEAKER_00: You know, there's a pocket there where they're uh they just keep getting rains.
• 2:28
  SPEAKER_00: And um in and we were looking at some data last week, and I think we had it in the uh grain wreck looking at percent of normal uh precipitation uh over the last 30 days, and that area is like 250 or 300 percent above normal.
• 2:44
  SPEAKER_00: Well, normally uh with May is that's when we receive quite a lot of people.
• 2:49
  SPEAKER_01: I saw a region map showing like the the wettest year going back last 200 years or whatever the number was, and a lot of those northern Iowa they were very, very wet.
• 3:00
  SPEAKER_00: Yeah, exactly.
• 3:00
  SPEAKER_00: Like like some like top 10 top wettest.
• 3:03
  SPEAKER_01: Yeah, actually down into like Kentucky and Tennessee, some of those areas had the wettest year that they've had actually for May.
• 3:09
  SPEAKER_00: Yeah, and and that's crazy to think about when you think how dry that area was, especially in Iowa, I guess, specifically, right?
• 3:17
  SPEAKER_00: Like essentially coming off three years of drought.
• 3:20
  SPEAKER_00: Yep.
• 3:21
  SPEAKER_00: Um, you know, you know, I know the the northwest and the northern part of Iowa had kind of shrunk a little bit out of the the crazy browns and reds of the drought monitor, but now they're white, right?
• 3:31
  SPEAKER_00: Like it's it's uh the clear free and clear of any drought uh according to the drought monitor.
• 3:36
  SPEAKER_01: 70% of corn was growing in a drought last June 27th.
• 3:40
  SPEAKER_01: And today, I mean the numbers said five percent last Thursday, but it's even less than that.
• 3:46
  SPEAKER_00: Exactly.
• 3:46
  SPEAKER_00: That's like even the areas of drought, the guys would say it sure doesn't feel like we're in a drought, right?
• 3:54
  SPEAKER_01: Yeah, yeah.
• 3:55
  SPEAKER_00: So so there there definitely are those pockets uh locally, that area, uh you know, an area upper in northeast South Dakota and then far southeast South Dakota.
• 4:05
  SPEAKER_00: So what does it mean?
• 4:06
  SPEAKER_00: It well, uh I guess it means we probably aren't it's gonna struggle to get to 90 million corn acres planted.
• 4:12
  SPEAKER_01: Um what is your opinion on that?
• 4:14
  SPEAKER_01: Like it did all the corn acres go in first, so that's fine, and now it's soybean acres that'll take the hit.
• 4:20
  SPEAKER_01: What's your opinion on that?
• 4:21
  SPEAKER_01: Because I keep whipsawing back and forth.
• 4:23
  SPEAKER_00: Yeah, so I actually I think we saw that, you know, as we started out getting these planting reports, like soybeans were way ahead of normal, right?
• 4:32
  SPEAKER_00: Because we saw guys planting soybeans before corn, uh, especially in our our local area, you know, talking to some seed dealers and farmers.
• 4:40
  SPEAKER_00: Um so I don't know if that changes much because uh eventually, you know, you start planting corn, and especially when it starts looking like boy, I don't know if we're gonna be able to get back into this field, then you're gonna go hard on corn, right?
• 4:54
  SPEAKER_00: So I I do think we're gonna have more prevent plant this year than we did last year.
• 5:00
  SPEAKER_00: Uh last year was like record low for the country, though, so like a million and a half acres in 23.
• 5:06
  SPEAKER_00: Uh, I think normal is around three million acres of prevent plant nationally.
• 5:12
  SPEAKER_00: Maybe that gets bumped up uh four to five, uh depending uh on where, you know, kind of how long this takes.
• 5:21
  SPEAKER_00: If we dry out, like right now, this weekend, uh, we could plant a lot of acres of soybeans.
• 5:26
  SPEAKER_00: So I guess what I'm my feeling is it'll be tough to get to a 90 million corn number because as we get into the first of June in wet areas of the Dakotas, especially, uh, you're gonna stop planting corn because we all remember 2019 planting corn in June can lead to even bigger headaches come October, November.
• 5:46
  SPEAKER_00: Um, and so there'll be a few more PP acres.
• 5:50
  SPEAKER_00: Uh, but I I do think it's gonna be a struggle to get to 90.
• 5:54
  SPEAKER_00: Although I when we got that number of 90 million acres, we all really kind of didn't believe it anyway, right?
• 5:59
  SPEAKER_00: Because we thought it was 92.
• 6:00
  SPEAKER_00: Exactly.
• 6:01
  SPEAKER_00: So so maybe we shake out at 90 um because there was going to be 92 and now there's not.
• 6:08
  SPEAKER_00: I we can speculate that the number was a number in the report, so that's what we have to work off of.
• 6:12
  SPEAKER_00: But uh that that'll be interesting.
• 6:15
  SPEAKER_00: Um, and so I guess as we look at uh what this late planting has done, you know, to a yield number.
• 6:22
  SPEAKER_00: In 2022, uh we kind of learned a little bit of a lesson, right?
• 6:26
  SPEAKER_00: The the June Wazday report uh had a lower yield number uh projected for corn uh that year that caught us a little bit off guard.
• 6:38
  SPEAKER_00: And we we started doing a little research into why did that happen.
• 6:43
  SPEAKER_00: And there's some information out there that the USDA puts out of calculating that yield number.
• 6:49
  SPEAKER_00: And part of it is tied to planting progress.
• 6:54
  SPEAKER_00: Uh historically they don't change it, but historically we kind of get the crop planted uh pretty timely.
• 7:00
  SPEAKER_00: What 2022 showed us is if the planting gets delayed, uh they can lower it.
• 7:07
  SPEAKER_00: And so uh let we'll take a little look back, but um the let's run through the calculation a little bit first.
• 7:14
  SPEAKER_00: So uh what what we did a little research and just looking around online and the USDA formula, there there's a pretty linear relationship between planting progress in the month of May uh and final yield.
• 7:31
  SPEAKER_00: And so what that means is uh what they figured out is if they take a snapshot of planting progress on May 15th, um, that if planting progress is uh ahead or behind normal, uh for each percentage point, it's going to adjust final yield by 0.289 bushels.
• 7:55
  SPEAKER_00: So if we're 10 bo 10% ahead of normal on May 15th, we're gonna go up 2.89 bushels.
• 8:02
  SPEAKER_00: If we're 10% points below, we're gonna go down 0.289 bushels.
• 8:08
  SPEAKER_00: Okay, and in 2022, that uh on May 15th, we were 10 percentage points.
• 8:17
  SPEAKER_00: No, excuse me, we were 20 percentage points behind the normal planting progress.
• 8:23
  SPEAKER_00: Uh again, this is back in 2022.
• 8:25
  SPEAKER_00: If you remember 22, uh we had a lot of that late planting was was Minnesota and North and the Dakotas uh specifically, but uh kind of a cold, wet spring, and the planting progress was really slow up until May 15th.
• 8:45
  SPEAKER_00: And then we had one of the biggest weeks ever.
• 8:47
  SPEAKER_00: If you look back at the historical chart, that week of the 15th through like the 22nd, we planted like 60% of the corn crop.
• 8:55
  SPEAKER_00: It was ridiculous, right?
• 8:56
  SPEAKER_00: So uh so that year was probably uh very uh exaggerated on the planting progress.
• 9:04
  SPEAKER_00: And so the calculation being 20 points behind the five-year average or normal uh resulted in, you know, you do the math, it's like close to six bushels of what the final yield should be reduced because you're behind on May 15th.
• 9:20
  SPEAKER_01: So given the numbers that we had from planning progress, they should have moved from a May yield they had at 177, they should have gone down to like a 171.
• 9:29
  SPEAKER_01: Correct in that report.
• 9:30
  SPEAKER_00: But they didn't they lowered it.
• 9:32
  SPEAKER_01: They lowered it, but not that much.
• 9:33
  SPEAKER_00: They didn't go that much.
• 9:34
  SPEAKER_00: And I think that's the important thing to realize.
• 9:36
  SPEAKER_00: I think they lowered it four bushels uh for on the June Wise report in 2020.
• 9:41
  SPEAKER_01: That's funny.
• 9:41
  SPEAKER_01: That's about where they ended up at 173.
• 9:43
  SPEAKER_00: Yeah, that is kind of crazy.
• 9:44
  SPEAKER_00: Yeah, you go through the whole year and it they were right back in in June.
• 9:48
  SPEAKER_00: But uh, I think that's another important lesson of we can do the math, they have this calculation, they say it adjusts 0.289 bushels.
• 9:55
  SPEAKER_00: They don't have to follow it exactly, right?
• 9:58
  SPEAKER_01: However, I think it gives us pretty good merit for maybe the direction they'll head with that number.
• 10:03
  SPEAKER_00: Yeah, so I I think that's where we're why we started looking at this for this year is um it seems like we're behind normal.
• 10:12
  SPEAKER_00: We are, right?
• 10:13
  SPEAKER_00: We or we're we're just like right at the five-year pace or close to it.
• 10:18
  SPEAKER_00: And but what's weird about this year is we started off ahead of normal, uh and then we kind of went normal, and then about the middle of May, we really flattened out, and so our late planting progress has affected us kind of towards the end of the planting season versus 22 when it was all at the beginning of the planting season.
• 10:39
  SPEAKER_00: And so, based on like our numbers, if you uh kind of take the data from the uh planting progress reports and would would kind of put it on a graph to where we were at May 15th.
• 10:51
  SPEAKER_00: Uh May 15th, uh and my numbers, everybody can can look at them if you want, uh, 58% is where the U.S.
• 10:58
  SPEAKER_00: was planted on May 15th.
• 11:00
  SPEAKER_00: The five-year average would suggest uh we would be at 63% planted.
• 11:05
  SPEAKER_00: So we were five percentage points behind, five percentage points times 0.289 bushel, it's roughly a bushel and a half.
• 11:14
  SPEAKER_00: Uh that would suggest we are a bushel and a half lower on yield based on planting progress uh on May 15th.
• 11:22
  SPEAKER_00: Now, given that, um I think a couple things to think about is the USDA might look at this and say, well, the late uh progress is at the end of the year.
• 11:36
  SPEAKER_00: We all know the later we plant a crop, corn or beans, our yield potential does go down, right?
• 11:41
  SPEAKER_01: Yes.
• 11:42
  SPEAKER_00: And so they might look at that and say, well, at the in by the end of the year, this could result in an even bigger bushel decrease.
• 11:50
  SPEAKER_00: Um, or they could leave it alone and say, hey, our math says bushel and a half, we'll see what happens.
• 11:55
  SPEAKER_00: But I guess the the point of of kind of this podcast or the conversation going around our office is in 22 we were caught a little off guard on a yield reduction in June.
• 12:06
  SPEAKER_00: Especially that big, that big, uh, strictly based off planting progress.
• 12:12
  SPEAKER_00: I don't want to be in the same boat this year.
• 12:14
  SPEAKER_00: Like we gotta be looking ahead and thinking about it, and we're trying to put uh a little bit of objectivity into a subjective uh number, and and I guess what uh my thinking is, and I think you share this, Mike, is it wouldn't be all that surprising to see them lower that uh net U.S.
• 12:34
  SPEAKER_00: national corn yield number on that June report.
• 12:36
  SPEAKER_01: So if they do bring it down a bushel and a half to 179.5, that would get you right below about two billion bushel ending stocks if you didn't change any of the other numbers.
• 12:47
  SPEAKER_01: So uh that that would get you about right there.
• 12:50
  SPEAKER_01: And given, you know, ethanol needs to continue to grind pretty heavy like last week, we need to have exports not fall back too bad.
• 12:57
  SPEAKER_01: Uh corn exports look pretty decent so far, but the the soybeans obviously a different story.
• 13:02
  SPEAKER_01: So uh, you know, if we do dip that below a 180 yield, that does start to tighten up that balance sheet just a little bit at least.
• 13:09
  SPEAKER_00: Yeah, and and so what the what's interesting on all this is so we we can go through the math suggest we're a little late planting because of rain.
• 13:18
  SPEAKER_00: Uh, but the old adage, of course, is rain makes grain.
• 13:22
  SPEAKER_00: That's the tough part.
• 13:23
  SPEAKER_00: And we've added a lot of subsoil moisture to areas that desperately needed it.
• 13:27
  SPEAKER_00: Uh so maybe USDA or the market looks at it, it's like, yep, we're a little low, uh we're a little slow planting, but come June, July, August, this is really gonna benefit things too.
• 13:39
  SPEAKER_00: So I guess that's the fun part that we'll have to wait and see.
• 13:43
  SPEAKER_01: All right.
• 13:43
  SPEAKER_01: Well, thank you for your time.
• 13:44
  SPEAKER_01: And thank you to all our listeners.
• 13:46
  SPEAKER_01: Please reach out to us at professional eggmarketing.com.
• 13:50
  SPEAKER_01: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 13:55
  SPEAKER_01: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 14:01
  SPEAKER_01: See you next time.