A key pricing variable for U.S. corn and soybeans planted in 2022 is the acres elected into crop insurance prevent plant program. U.S. planting progress as of June 5 is assessed. Historical relationships estimate prevent plant acres in 2022 at 3.2 million for corn and 0.8 million for soybeans. These estimates are higher for corn but less for soybeans than their 2007-2021 average values.
Prevent Plant Overview
Prevent plant is a provision of publically subsidized individual farm yield and revenue insurance. Specifically, if an insured cause of loss, such as excessive moisture, delays planting to or after a date set by USDA, RMA (U.S. Department of Agriculture, Risk Management Agency), a farmer has the decision to plant a crop or not plant a crop and take a prevent plant payment.
The initial prevent plant date varies by region and crop. Prevent plant is, in effect, a conditional land set aside decision for the farmer triggered when an insured cause of loss delays planting until a date set by RMA.
Corn Prevent Plant
Despite a slow start, U.S. corn planting as of June 5, 2022 equaled the average percent planted by this date for the 2007-2021 crops (see Table 1). The same holds for South Dakota and Minnesota. In contrast, corn planting in North Dakota continues to lag noticeably.
North Dakota accounts for 15.4% of U.S. corn prevent plant acres reported by USDA, FSA (Farm Service Agency) since 2007, which is when the data becomes available electronically, and 4.0% of intended U.S. corn acres in the March 2022 acreage report. Corn prevent plant’s first decision date for most of North Dakota was May 25.
Soybean Prevent Plant
U.S. planting of soybeans is slightly ahead of normal as of June 5, 2022 (see Table 2). The same holds for South Dakota. In contrast, soybean planting lags noticeably in Minnesota and, especially, North Dakota. North Dakota and Minnesota respectively account for 17.4% and 5.6% of U.S. soybean prevent plant acres since 2007.
They account for 8.8% and 7.7%, respectively, of intended U.S. soybean acres in the March 2022 acreage report. Soybean prevent plant’s first decision date is June 10 for both states.
Planting Progress and Prevent Plant Acres
Linear regression is used to analyze year-to-year variation in U.S. corn and soybean prevent plant acres since 2007. Explanatory variables are (1) the U.S. planting progress at the end of first week in June (week 22 in USDA, NASS (National Agricultural Statistical Service) reports) and (2) a measure of the economic incentive to plant the crop.
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The latter is calculated as: (average U.S. cash price for the main planting months of April, May, and June) divided by (U.S. total cost of production divided by U.S. trendline yield for the year). Planting progress, cash prices, and yields are from Quick Stats (USDA, NASS). Cost of production is from USDA, ERS (Economic Research Service).
Estimation of trendline yield is discussed in Data Note 1. Average, minimum, and maximum values of the economic incentive variable were, respectively, 114%, 80% (in 2020), and 163% (in 2013) for corn and 117%, 78% (in 2019), and 157% (in 2008) for soybeans.
Because 2022 planting progress particularly lagged in Minnesota and North and South Dakota, planting progress in each of these states was added to the regression equation to assess if it would improve statistical significance of the equation. The only crop-state variable that significantly increased R2 explanatory power was North Dakota planting progress on corn.
R2 explanatory power of the linear regression equations are 91% for corn and 82% for soybeans (see Table 3). As expected, the planting progress variables have a negative relationship, implying slower planting is associated with more prevent plant acres. Each planting progress variable is significant with at least 98% statistical confidence.
The economic incentive variable is not statistically significant for corn at the conventionally used 95% level of statistical confidence, but, is statistically significant at 99% for soybeans. The mixed findings for the economic incentive variable suggest caution regarding the impact that market incentives to plant have on prevent plant decisions.
Using the reported planting progress as of June 5, 2022 and the economic incentive ratio calculated using available data for 2022 (see Data Note 2), 2022 prevent plant acres are estimated at 3.2 million for corn and 0.8 million for soybeans. Estimated prevent plant acres exceed the 2007-2021 average for corn but are less than the 2007-2021 average for soybeans (see Tables 1 and 2).
These estimates need to be used with caution. There are only 15 observations with a notable outlier. Removing the large prevent plant year of 2019 results in estimates of 3.6 and 0.8 million corn and soybean prevent plant acres in 2022 (see Data Note 3). The averages without 2019 are 1.9 million for corn and 0.9 million for soybeans.
Historical relationships suggest that, compared with the averages for 2007-2021, U.S. corn prevent plant acres in 2022 are likely to be somewhat larger while U.S. soybean prevent plant acres in 2022 are likely to be slightly less.
History suggests that the lag in the planting of corn in North Dakota in 2022 is especially important.
While not a prevent plant issue per se, the sizeable share of North Dakota corn and soybeans and Minnesota soybeans that were planted late will have an elevated risk of damage from an early-to-normal frost.
Although explanatory power of the regression analysis is substantial, there are only 15 observations, suggesting caution.
Final reminders: (1) weather trumps any crop forecast and (2) history is a compass, not GPS tracking. Use accordingly.