Market Matters Blog
Katie Micik DTN Markets Editor

Tuesday 05/28/13

Prevent Plant Complicates Corn Acreage Picture

It's a choice many farmers in Minnesota and Iowa haven't had to make before: do I make a prevented planting claim? How long do I hold out hope of planting corn?

Answering the question takes knowing your risk tolerance, knowing your breakevens and separating the business decision from your self-identity. For most, farming isn't just a business; it's a way of life. The tension between the two can create an enormous amount of stress, and farmers I've talked to describe the situation as ugly, frustrating and sad.

"I'd rather grow a crop. I have never taken prevented planting before. I like that at the end of the year I can look and say, 'here are the fruits of my labor,'" one Minnesota farmer told me this morning. "It certainly keeps the faint of heart out of our business."

He remembers going to his banker years ago, trying to plan out his cash flow and show he could make $10 or $20 an acre.

Right now, if he takes the prevent plant payment, he knows he'll net about $100 per acre after paying for the fertilizer he already put down, the cover crop he'll plant and what he'll spend to control weeds. His land won't dry out from this weekend's rains until Friday at the earliest, and that's IF the weather stays dry. The weather forecast leaves little room for hope. He won't make the final call taking the prevented planting until the June 5-10 timeframe.

"I know I'll come out with my head above water," by taking the prevented planting route, he said, adding that he has some math to do on soybeans and whether it'd be worth a switch. But he also said, "one size doesn't fit all. Everyone is going to do something different, something that's right for them."

It's the end of May, and the market still doesn't have a firm grasp on how many acres of corn will be planted this year. Monday's planting report showed 86% of the crop has been planted nationally, and that means roughly 13.6 million acres intended for corn hasn't been planted yet (using USDA's 97.3 million acre projection from March). In north central and north east Iowa, only 72% and 75% of the crop has been planted, respectively.

"Accounting for prevented planted acreage, the percent completed may actually be higher," DTN Senior Analyst Darin Newsom said about the national progress. USDA won't release its updated acreage estimates until June 28, one month from now.

The big questions now are:

1) How many of those 13.6 million unplanted acres will take out a prevented planting claim? (Early estimates I've heard are in the 3 to 4 million acre range.)

2) How many of those acres will switch to soybeans? (I haven't heard any estimates on this one, am interested in your thoughts, readers.)

3) Is USDA's production estimate of 14.1 billion bushels, using 158 bushels per acre for yield, too high? (A farmer in Greene, Iowa, that I spoke with thought this week's torrential downpours washed away a lot of nitrogen and could be a drag on yields.)

What are your thoughts?

Posted at 4:55PM CDT 05/28/13 by Katie Micik
Comments (1)
Prevent plant does not work for soybeans as it does for corn. After land cost it is hard to shed enough expense to make it work. So planted acres of soybeans could be at USDAâ?™s estimate or higher. Grower that are in a position to take prevent planting need to know the rules, to get as much corn versus bean prevented plant, to get as much coverage as they paid for. From this point of view the next upward push in price could come from wheat stocks. The bullishness of exports seems to be declining barring a normal freeze in Brazil. HRWW is sick. The market is expecting world supplies to cover our decline in production. Short corn stock could have feeders sucking up wheat. This may be push in prices this mess of weather is providing. It seems wheat needs to pull corn higher. Freeport, IL
Posted by Freeport IL at 12:58AM CDT 05/30/13
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