Around this time of year (April through June) it is common to hear or read news stories touting things like “86-percent of corn now planted, 67-percent of soybeans”. But what does that mean? Why does it matter? Who is behind these numbers?
In a state like Iowa, much of the economy is driven by agriculture. Very few people are directly involved in planting and raising crops. In Iowa there are approximately 85,300 farms. If every farm counts two people as farmers we can estimate there are 170,600 farmers in Iowa. Compare that to the state’s population of 3.155 million and we see that only a little more than 5% of Iowans are farmers. While this seems small, agriculture and agriculture related industries employ one in six Iowans or 17% of the workforce (400,000 jobs). Agriculture is responsible for adding $72.1 billion to the state’s economy, or 27 percent of the state’s total. We begin to see the ripple effect as this revenue and these jobs then help support other industries growing and continuing to thrive like manufacturing, finance, healthcare, education, and so much more. Agriculture has been called an engine for Iowa’s economy.
So, you could say a lot is riding on the success (or failure) of the corn and soybean crop. While it might seem like people in an urban setting are removed from the impacts of the farm, a failed crop (from droughts or floods or other factors) would have ripple effects that could lead to a downturn of the economy and we all would be impacted.
The National Agricultural Statistics Service (NASS) is a branch of the United States Department of Agriculture that works with farmers to track planting of crops and the subsequent health of the crops and the quality of the harvest. One of the field offices is located in Iowa and works closely with the Iowa Department of Agriculture and Land Stewardship. Iowa is broken in to nine districts. Each district is closely monitored and then data is compiled into a weekly report. The report details things like days suitable for fieldwork. If it is raining or if the soil is too muddy from rain, tractors and heavy equipment can’t be taken out into the field to plant or work the soil. Farmers have a limited window in which they can get seeds in the ground. Soil temperatures have to be at least 50 degrees Fahrenheit for seeds to germinate. So too early in the year and the seeds won’t start growing. Crops also need to have enough time to grow. So if they are planted too late in the year they won’t mature before the weather starts turning cold again. The optimal window for planting is April and May. That means that 26.5 million acres need to be planted in a 60 day time period. If it rains for 30 days, then that cuts the planting time in half. As many as one million acres need to be planted per day in Iowa to be successful.
NASS tracks how many acres of corn and soybeans have been planted. They also separately track how many acres have emerged and successfully germinated. Farmers are fraught with challenges. Maybe a farmer is lucky enough to get their planter out in the field and get seeds planted. But then if that is followed by two weeks without rain, the seeds may not germinate. Or if there is too much rain the seeds could get drowned out. So planting is important, but emergence is also important. The weekly NASS reports also track the quality of the crop (very poor to excellent). These data points are tracked from corn and soybeans, but also for hay, oats, and pasture.
Why does it matter?
A lot of farming is based on weather. That makes it a bit of a guessing game. The more information that can be collected, the less of a guessing game it is. One of the biggest reasons we want to track crop condition is to ensure we have an adequate food supply in the upcoming months. It has been a long time since the U.S. has faced any sort of food shortage, but in other parts of the world it can be a real and devastating problem. A drought and loss of one year of crops could lead to widespread famine and the fallout of that famine. Farmers in the U.S. and those who track the progress of those crops have developed a reliable system to hopefully prevent any sort of food shortage – even if severe weather were to hit.
The second reason we want data on crop conditions is to make the economy and market less volatile. Corn and soybean prices change year to year (and day to day) based on supply and demand. The prices are set based on what customers are willing to pay. If there is a high supply and low demand, the price might be very low. If there is a low supply and a high demand, the price might be very high. By knowing what the condition of the crop is early in the planting season there are some guesses, assumptions, and estimations that can be made about what the harvest will be like and what the supply will be like. We can’t always know what the demand will be, but if we know approximately what the supply will be that can help us reduce the volatility and fluctuations of the price.
The third reason that people want to know the condition of crops is to have more security in investments. Farmers and investors can buy and sell crops on the futures market. This means that a farmer might sell their 2021 crop in March before it is planted and long before it is harvested. A farmer would know what costs they would incur during the process. They could negotiate a futures contract that would ensure they cover their costs and make money from their crop. This mitigates risk. However, if the price of the cash market went up, they wouldn’t be able to take advantage of that. That’s where investors come in. They assume the risk and hope that the cash market price goes up. That would allow for them to make money. It is a bit of a game of chance. But with the right information, like the condition of the crop at various stages throughout the growing season, farmers and investors can make some good guesses and hopefully both come out ahead.
The fourth reason that we want to know the condition of crops is because of that ripple effect mentioned earlier. Consider John Deere and other implement dealers. It can take them months to build a new tractor start to finish. And they have to source all of the parts from various suppliers around the world. The whole process could in theory take a year or more if you consider taking the raw ingredient (mining iron ore) to steel (processing the ore into steel) to a finished tractor (shaping parts, assembly, etc.). A limited number of tractors can be built each year with limited workers, limited factories, and limited time. Now consider the farmer. They might only buy a new tractor if they have had a good growing season and were able to sell their crop for a significant profit. (New tractors might cost $500K or more.) Knowing that farmers will only buy tractors when the conditions are good, John Deere can watch the crop report and have a better idea of how many tractors they should build in a given year. The people and businesses that supply the parts for John Deere can have a better idea of how many widgets they should build in a given year. The people and businesses who supply the raw ingredients can have a better idea of how much iron ore or other raw material might be needed.
So, the crop report might only be a brief story on the evening news. But its importance to a stable food supply and economy cannot be understated. For this year (2021) as of May 24, things are looking pretty good. Planting of Iowa’s expected corn crop is nearly complete at 97%, two weeks ahead of the 5-year average. Corn emergence has reached 75%, five days ahead of normal. Seventy-eight percent of the crop is in good or excellent condition with only 1% in poor condition. Eighty-nine percent of the expected soybean crop has been planted, 15 days ahead of the 5-year average. Soybean emergence has hit 53%, nine days ahead. Topsoil soil moisture levels are at 82% adequate or surplus. Subsoil soil moisture is 60% adequate or surplus.
Stay tuned (or check back in) for the fall as the crop reports will continue to monitor the quality of the harvest. More challenges are in store there as farmers need to dry the grain in the field to the right moisture level, avoid fall rains that might get combines stuck in the field, and avoid mold, wind, or other issues that might damage the crop that they’ve toiled to grow.