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From the Furrow – Dr. Frayne Olson – June 18, 2024
In our weekly series From the Furrow, host Mike McGinnis and fellow grain geeks shed light on current market conditions and how grain producers can take action to manage their risk.
This week, Mike is joined by Dr. Frayne Olson, Professor and Crops Economist at North Dakota State University. How does USDA put together its mid-year estimate of planted acres? Is it likely we’ll see significant changes in the upcoming Acreage report, versus the Prospective Plantings report issued earlier this year? Mike and Frayne discuss those topics and a whole lot more.
Questions or comments? Topics you’d like to hear us discuss? Contact us at [email protected].
Show Transcript
(Transcript auto-generated)
00;00;00;13 – 00;00;16;22
VOICEOVER
Futures trading involves risk and is not suitable for all investors. Content provided in the segment is not for educational purposes and is not a solicitation to buy or sell commodities. Opinions and statements of guests not affiliated with every egg of their own, and do not reflect the views of the brand. The accuracy of their statements can not be guaranteed by a Barack.
00;00;16;25 – 00;00;37;07
MIKE
Hi, and welcome to From the Furrow, brought to you by Ever AG Insights. Each week we talk with subject matter experts on news and topics affecting the grain markets. I’m your host, Mike McGinnis. We get started today with a review of the markets. Today is Tuesday, June 18th, 2024. We are seeing a higher market today July corn up $0.06 at 449.
00;00;37;07 – 00;01;03;22
MIKE
New crop December up four and a half at four 67th July. Soybeans up $0.12 at 1170. Meanwhile new crop November up a nickel at 1135. And the July wheat futures contract out of Chicago down $0.04 at 587. Our guest today is Brian Olson. He’s a professor and crops economist at North Dakota State University. And we are going to talk today about the USDA’s June Acreage report, which comes up on Friday the 28th.
00;01;03;22 – 00;01;27;19
MIKE
And what we’re trying to do is to really figure out from brain also, other economists this week as to how accurate the USDA’s numbers are in the June acreage report versus what they estimated in the March prospective plantings report. And with that, we do want to inform you that in March, the USDA estimated US corn acreage this year at 90 million acres.
00;01;27;21 – 00;01;55;28
MIKE
And if realized, of course, that would be 4 million acres less than last year for soybeans. USDA in March estimated 86.5 million. That’s about 2 million more than last year. If realized. And of course, that all wheat acres was 47.5, about 2 million less than last year. So with that, we want to help our listeners understand how USDA gets this midyear estimate and how it compares with its March planting intentions estimate.
00;01;56;01 – 00;02;22;18
FRAYNE
Okay, so let’s talk a little bit about the process and procedures that USDA uses because their solicitors standing about how national statistics does that. So both some march prospective plantings as well as the June acreage reports. Both of those are farmer based surveys. So this is all about what farmers are telling them. So if there’s a difference between the march and the June and the June and the final, most of that difference is estimation problems at the farm level.
00;02;22;18 – 00;02;44;01
FRAYNE
It’s not necessarily USDA because all they’re doing is compiling the survey results. A couple of things also with that. So I don’t want to put all the blame on farmers. Right. Because USDA has procedures and they’re very kind of open about how they do things. But the process that’s used, and that’s one of the advantages I see from using the USDA data versus like a private forecasting company.
00;02;44;02 – 00;03;04;10
FRAYNE
Okay. So two things. Number one, USDA, their samples are always much larger than anything that a private analyst or someone else would do from a sample size. Number one. And then number two, they’re trying to be very statistically correct. I mean, these are people that have their PhDs and statistics, and so they know how to do sampling. They’re trying really hard to make it representative.
00;03;04;10 – 00;03;27;15
FRAYNE
So they’re not only worried about like the core corn Belt Iowa, Illinois, Indiana, Nebraska. They’re also trying to take up what are some of the what I call transition zones, those minor producing areas like in North Dakota, where we swing back and forth a lot between acreages. So they’re trying to make sure that they get enough samples from, like, a North Dakota or a Missouri or an Oklahoma to make sure that we get the core number right.
00;03;27;21 – 00;03;35;27
MIKE
What is the return of USDA surveys from farmers? I understand USDA officials are getting upset with more and more farmers not returning the service.
00;03;36;02 – 00;03;54;28
FRAYNE
Oh, they haven’t, and if you look at the end of each report, you pull some of the language and verbiage from there, like accuracy checks. They also have a couple paragraphs about kind of a survey method that they use and how many surveys that were included, how many farmers had been surveyed to get these results. So two things are going on.
00;03;54;28 – 00;04;15;15
FRAYNE
Yeah, they’re sending out a lot of surveys. They’re only getting a portion of them back. And the number of surveys being returned is also dropping. Now some of that can simply be explained by there’s fewer farmers. Right. We continue to get consolidation of farmers. And there’s also some farmers that just won’t answer the surveys. And they are very concerned about that.
00;04;15;15 – 00;04;35;03
FRAYNE
They’re trying to be as accurate as possible. And if you get a certain type of farmer, a certain demographics of farmer, that won’t answer, then all of a sudden, you know, you have a problem, right? You’re not picking up all of the surveys. So for example, just a hypothetical. Let’s say it was only really small farmers that answered the questions and the really big farmers did not.
00;04;35;03 – 00;04;52;13
FRAYNE
Well, now you have some sampling bias and we have to be concerned about that. Right? It’s not necessarily because they’re smaller or larger. It’s that, you know, a larger farmer might have a different, well, let’s say like up here in North Dakota, right? A larger farmer, there’s a higher probability that they’re going to have some prevented planting if it gets really wet.
00;04;52;13 – 00;05;14;00
FRAYNE
So there is this kind of sampling differences or problems that go on now between the March report and the June reports. They try very hard to go back to the same farmers. So in the March report, the way the question is asked is what are your planting intentions? What are you intending to plant as of, you know, first couple of weeks in March, knowing that that can change.
00;05;14;01 – 00;05;40;12
FRAYNE
You can change based on prices. You can change on weather conditions, you can change on, you know, a gazillion different things. What you know today, what is your plan? That’s the March 31st Prospective Plantings report. Okay. Now in June, the June report, they’re saying, well, what did you actually see? There is a drop off. If you look at the numbers, there’s usually about 77,000 farmers respond to the March report and there’s about 65,000 a report on the June.
00;05;40;13 – 00;06;01;15
FRAYNE
They do lose some. There’s some people that reported initial that don’t report and then follow up. So there is a little bit difference in sampling. But you know even with 65,000 I mean that’s still pretty good sample size you know like across the U.S.. And they have that broken down. So there’s usually like in North Dakota, there’s usually about 450 farmers in North Dakota that respond and give us the numbers for North Dakota.
00;06;01;15 – 00;06;21;04
FRAYNE
When they’re surveying, they say farmer X, what do you intending to plant? And they said, well, I’m going to have this many acres of corn, as many acres of soybeans, as many acres of wheat. Okay. And so that one person provides data for like up here, 4 or 5 different crops. So it’s not that they’re just surveying for corn only and then soybean only separate.
00;06;21;04 – 00;06;39;24
FRAYNE
So we do have a drop off in respondents. The number of people that respond to the second one versus the first one does drop off for whatever reason. They don’t reply the second time. And if you watch those numbers, the number of people that actually do respond that has slowly, slowly shrunk over the last ten years, I’ve been watching that.
00;06;39;24 – 00;06;54;13
FRAYNE
And it is slowly comes down a little bit every year. And again, some of that could be just people don’t want to respond anymore. Some of it is we got less farmers, you know, there’s a lot of reasons for that. But you’re absolutely right. USDA is getting frustrated that they do all this work and they try and send out these surveys.
00;06;54;13 – 00;07;10;24
FRAYNE
You know, farmers complain about the results and they don’t participate. I’ve stood up in front of farmer meetings and talked about this before, and I wag my finger and I said, guys, if you don’t like the numbers, they’re your numbers. You know, there’s always a few guys. So yeah, but I don’t respond. And there’s always one guy in the back row that says, well, don’t they know we lie so well?
00;07;10;24 – 00;07;27;17
FRAYNE
Okay, so you lie. All right. We know that. In fact, if you put down, I’m going to plant 10,000 acres of soybeans and five acres of corn. You know, they’re going to surrender. Survey out. I mean, they’re not stupid. Okay. Number one. Okay. Number two, if you do lie, right, I mean, you purposely try and put in the wrong numbers.
00;07;27;17 – 00;07;53;19
FRAYNE
You know, if you overestimate, there’s going to be some that will underestimate. And so there’s this thing in statistics about if you have a large enough sample, you have enough people responding. The average number is still going to come in really close to the real average. So there’s actually statistical theory that says if you have enough samples, if you have enough people responding, even though the people are either purposely putting in the wrong number or accidentally put the wrong number in, you’re still going to come pretty close.
00;07;53;19 – 00;08;12;23
FRAYNE
For the average. It’ll take care of itself. Some people overestimate, some people underestimate. They kind of wash each other out when you sample. When you do a survey versus look at everybody do a population like a census, if you have a large enough number of people responding, those two numbers for an average are going to come very, very close, very close.
00;08;12;24 – 00;08;41;19
FRAYNE
So now let’s talk about the final numbers. How does USDA get that final January number. There’s actually three sources of data for the final January number. They do a farmer survey and that’s voluntary response. And then they cross-check those numbers with what farmers report to FSA and with what farmers report to me. So FSA being the farm program and Army being crop insurance, the difference if I lie on my Nass survey, you know, there’s no penalty for that.
00;08;41;19 – 00;09;04;15
FRAYNE
If I purposely misrepresent data on my FSA or purposely misrepresent data on my army, that’s a felony. I can go to jail. I know of farmers that have gone to jail because they misreported or misrepresented their numbers on both FSA and Army, because you’re taking money from the government. Now. I want to be really careful here. Not every farmer in the U.S signs up for the farm program.
00;09;04;15 – 00;09;25;16
FRAYNE
Not every farmer in the U.S signs up for crop insurance, so the numbers aren’t going to exactly match. Now, up here in North Dakota, for example, almost every farmer in the state signed up for the farm program and signs up for crop insurance. And so those numbers are going to be really, really close. The averages, the planted acreage and harvested acreage numbers between those three.
00;09;25;16 – 00;09;42;09
FRAYNE
A sample of the farmers, as well as FSA numbers and army numbers are going to be really close together. They will never be the same, but they’re going to be pretty close. And that’s how they cross-check. They don’t cross check to say, oh, Bob, you answered this on your survey and this at FSA and this and you know, you’re wrong.
00;09;42;11 – 00;09;59;21
FRAYNE
It’s like, no, no, no. They take the averages, you know. So they’re looking at county averages. They’re looking at statewide averages. They’re looking at national averages. They’re not looking at individual people. They’re doing the statistics are saying what was the average reported for this area or this region. And they’re cross-checking that to make sure that there aren’t big discrepancies.
00;09;59;21 – 00;10;20;11
FRAYNE
And if there are big discrepancies, then you start diving into the numbers would have been say, okay, can we explain why that might have occurred? So that final acreage number for both harvested acreage and yields, because they do the same thing with yields. Those are pretty accurate. They’ve got three data sources from essentially the same people. And they’re cross-checking making sure that nothing looks too wacky.
00;10;20;11 – 00;10;26;26
FRAYNE
Those are the three. So you got the Nass survey. You got Army reporting got FSA reporting. Those are the three data sources.
00;10;27;01 – 00;10;57;04
MIKE
How accurate are USDA estimates between the March and June reports and what can we expect? We have done some research at least the last ten years on average. The difference between the March and June reports for corn is 26,000 less acres in June than in the march. Now for soybeans, we found that on average in the past ten years, the March and June reports had a difference of 402,000 acres for soybeans.
00;10;57;09 – 00;11;12;07
MIKE
In other words, the USDA had 402,000 more soybean acres in its June estimate than it did in March. But let’s take a look at this frame. How accurate are USDA estimates between the March and June reports and what can we expect?
00;11;12;07 – 00;11;38;24
FRAYNE
Let’s talk about why would there be a difference between March and June? Because again, the assumption is that somehow USDA is generating these numbers through some big algorithm. It’s like, no, they’re surveying farmers and they’re reporting the survey results. So this is what farmers are telling Nass they have done or planning to do. And so the discrepancy you the difference is essentially the change in what farmers thought they were going to do versus what they actually.
00;11;38;26 – 00;12;02;21
FRAYNE
My point is the implication I talk about this a lot. I’m not trying to say that farmers are wrong, but the implication is that somehow USDA is missing their estimates. This is a USDA problem, and USDA is consistently too high or consistently too low. It’s like, no, no, no, no guys. No. They’re using the exact same process. The reason you’re getting differences is because farmers changed their plans.
00;12;02;21 – 00;12;09;06
FRAYNE
USDA didn’t change their process at all. The reason there’s a difference is because some rumors changed their plans.
00;12;09;09 – 00;12;23;10
MIKE
Well, this is a year of good planting progress. Corn is essentially done. Soybean planting at 93% as of June 16th. Does this indicate there might not be a lot of changes in acreage estimates from the March to June reports?
00;12;23;12 – 00;12;43;23
FRAYNE
Right. Okay. So let’s talk about the crop progress report. How is the data for the crop progress report. It’s not somebody in DC and a computer either making stuff up every week. How do they get those numbers. So there’s typically what they like to do is use what they call air quotes egg professional. They’re either going to go to an extension agent in that county.
00;12;43;23 – 00;13;04;13
FRAYNE
What they’re trying to do is get county level data. So they either use the extension agent and request that the extension agent send in the reports, or they go to the FSA county director and they ask to put in their reports. It’s a subjective estimate. Every Tuesday morning at Ndsu, we have a conference call with the crop science people.
00;13;04;15 – 00;13;21;00
FRAYNE
And with all this kind of the state specialist as well as an area specialist, and some of the county people join us as well. And so we talk a little bit about, you know, what are the county agency going on in their particular counties, how much rain to get? What about planting progress, frost damage to snow, insect problems.
00;13;21;00 – 00;13;40;02
FRAYNE
You got aphid problems coming up right. Weights, agronomy questions. And several of them talk about what they reported on their weekly updates that they send in to USDA, Nass, and some of them literally. I know a couple of them that every Sunday they’ll jump in the car and they’ll make the exact same route to do the exact same trip around the county.
00;13;40;02 – 00;13;57;25
FRAYNE
And one guy, you know, we said, yeah, we all start at home after church. We drive around the county, we stop at the local dairy Queen and pick up some ice cream every Sunday. That’s their Sunday drive. And they’ve done it for years. That’s a he and his wife. That’s what they do, right? Other agents will call up a few handful of farmers that say, hey, how are you doing on your you’re planting?
00;13;57;26 – 00;14;11;26
FRAYNE
Because when you drive around the county and you say, well, I can tell you how many fields have been planted, but I don’t know what the intended planting is for that particular field. So many agents will try that again. For the farmers, you don’t treat for farmers say, hey, how you coming? You know what kind of progress you make this week?
00;14;11;27 – 00;14;27;23
FRAYNE
What would you say? How far along aren’t. And then they’ll fill in that in. And and that’s both the planting progress numbers. And then also the crop condition of crop and just a ratings or is a subjective assessment of how good is the crop look. And the joke is yeah, it’s a 260 assessment. You got both windows rolled down and driving 60 miles an hour.
00;14;27;24 – 00;14;47;21
FRAYNE
They send it in to USDA. It’s usually required that they send it in by certain time on the Sunday. Acknowledge it. It’s a later date electronically. And so they get the run button on the statistics. And by Monday afternoon they split the answers out. But if you notice, they do only by state. They do statewide averages. So what happens if we have a county agent last year that leaves.
00;14;47;21 – 00;15;05;02
FRAYNE
So we got a new county agent. Do you think they might assess things a little differently? Or if all of a sudden the county FSC director says, now I’m not going to do it this year. I’ll hand it off to the county agent, but then do it again. It’s this averaging thing. So in Iowa they have, one has got 102 counties in North Dakota, we have 53 counties.
00;15;05;02 – 00;15;20;27
FRAYNE
They’re both about the same land area, Iowa and North Dakota, about the same size. Iowa has over 150 to 80. So we get 53 data points theoretically from North Dakota. You got a little over 100 data points, which is going to be more accurate. Probably the Iowa one. Right. Because they got more counties. It’s a numbers game. Right.
00;15;20;27 – 00;15;41;04
FRAYNE
So my point is yeah it’s the crop progress report is extremely valuable. It provides a lot of really good information. What I always recommend people do is be very careful about comparing this year’s numbers to last year’s numbers to the year before numbers. You can do it. And I know a lot of people do gives you some information, gives you a ballpark or reference point or we had or behind.
00;15;41;04 – 00;16;01;26
FRAYNE
But you had to realize that the people filling that out might be different. What I do think is pretty and accurate is saying, well, how are we doing last week versus this week? Probably it’s the same people answering the same question a week apart. One person might say would be a good looking crop. Another person might say, well, that’s a poor looking crop because it’s subjective.
00;16;01;26 – 00;16;15;12
FRAYNE
Biased. I mean, it’s a subjective assessment. But if I’m consistently I say, well, it went from a poor to a good or good to an excellent, you know, it went up. Did it go up, did it go down to, to stay about the same? You can have three people look at the same crop and they might assess it different.
00;16;15;12 – 00;16;35;15
FRAYNE
So again I think there are some people that are putting a lot more pressure on the numbers, a lot more pressure on these reports than they really should. You got to understand how they’re being prepared and what information really does provide. It’s very valuable data. It’s very valuable because we can monitor and watch what happens very quickly across the whole country.
00;16;35;15 – 00;16;52;22
FRAYNE
You can say, yeah, I was getting behind an Illinois, a great that’s good information to know. Can’t put it in context. You’ve got to put it in the right framework. My point is that people filling out the crop progress report are different from the people that are showing up there. I’ve seen it. I know what some of the the analysts and even some reporters are doing.
00;16;52;22 – 00;17;10;29
FRAYNE
You’re saying, well, if the prospective planning report says so many acres are going to be planted in the state, and the crop progress report says we’re 47% complete, that means this many acres have not been planted. And I’m going, I see your math, but I don’t know how accurate that is. Okay, so let’s pick our North Dakota. Let’s pick on soybeans for just a minute.
00;17;10;29 – 00;17;36;18
FRAYNE
Now North Dakota’s become a pretty big soybeans. The density of the crop, how many acres and also what the yield potential is vary significantly across the state. So the best soybeans, the highest yielding soybeans, the most highest density of soybean acres is in the southeast corner, right in the corner of Minnesota and South Dakota. And as you become further north and further west, that density of acreage drops off and the yield potential drops off.
00;17;36;21 – 00;17;55;26
FRAYNE
So by the time you get up to the northwest corner of the state, soybeans is an anomaly. This isn’t Iowa, where you have, like soybean acres equally spread across the whole state and corn acres equally spread across the whole state. We have a big concentration in the southeast corner, and almost nothing in the northwest corner, because the soil types and the rainfall.
00;17;55;26 – 00;18;18;01
FRAYNE
So the soil types are very different. We’re in the shadow of the Rocky Mountains, so western North Dakota gets a lot less by half. The rainfall in eastern North Dakota has. There’s some really stark differences between across the state. So my whole point of bringing this up. All right. So we talk about percent planted okay. Well we could have the acres in the southeast corner of the state all get planted.
00;18;18;05 – 00;18;35;02
FRAYNE
We had a huge amount of rainfall on the central portion of the state. Any time it rains, we got a little water puddles all over our fields. Okay. Which means it kind of slow slip our planting progression. And obviously you like to wait for the whole field to dry out and do it all in one chunk instead of having going around all these little spots that have to come back later, replant.
00;18;35;07 – 00;18;53;06
FRAYNE
You can have the big core producing region of the state, have almost ideal growing issues, has got planted really early, really fast, and then the other part of the state be really wet and behind. You can say, oh well, North Dakota is only about, you know, 35% planted, but also 35% was in that southeast corner where all the soybeans are.
00;18;53;06 – 00;19;09;02
FRAYNE
Do you count bushels instead of acres? Yeah. You’re talking like 85% of the bushels just got planted. We’re not going to have a problem. But when you look at the acreage say, oh yeah, no, we’re only 35% planted. Well, yeah, because the soybeans ahead of the planted are only 25 bushel leaves. I mean, I’m being sarcastic, but you see where I’m going with this?
00;19;09;04 – 00;19;35;24
FRAYNE
I understand your questions. They’re very good questions. And these issues and the things you’re talking about need to be presented because I think there are people that are they’re not purposely misrepresenting. They’re making some really big assumptions about how the information is being collected, how it’s being reported and what it really represents. So they’re doing some really quick math and making some judgments on what they think is going to happen and misunderstanding of what’s going on.
00;19;35;24 – 00;19;37;02
FRAYNE
This comes in the problems.
00;19;37;04 – 00;19;54;00
MIKE
Well, thanks again to Doctor Frayne Olson, professor and crops economist at North Dakota State University. And thank you for joining us today. If you’ve enjoyed listening to From the Furrow, be sure to tell a friend or to and subscribe to us wherever you listen to your podcast. Thank you to the Ever Insights Crew for their work on today’s show.
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In our weekly series From the Furrow, host Mike McGinnis and fellow grain geeks shed light on current market conditions and how grain producers can take action to manage their risk.
This week, Mike is joined by Dr. Frayne Olson, Professor and Crops Economist at North Dakota State University. How does USDA put together its mid-year estimate of planted acres? Is it likely we’ll see significant changes in the upcoming Acreage report, versus the Prospective Plantings report issued earlier this year? Mike and Frayne discuss those topics and a whole lot more.
Questions or comments? Topics you’d like to hear us discuss? Contact us at [email protected].
Show Transcript
(Transcript auto-generated)
00;00;00;13 – 00;00;16;22
VOICEOVER
Futures trading involves risk and is not suitable for all investors. Content provided in the segment is not for educational purposes and is not a solicitation to buy or sell commodities. Opinions and statements of guests not affiliated with every egg of their own, and do not reflect the views of the brand. The accuracy of their statements can not be guaranteed by a Barack.
00;00;16;25 – 00;00;37;07
MIKE
Hi, and welcome to From the Furrow, brought to you by Ever AG Insights. Each week we talk with subject matter experts on news and topics affecting the grain markets. I’m your host, Mike McGinnis. We get started today with a review of the markets. Today is Tuesday, June 18th, 2024. We are seeing a higher market today July corn up $0.06 at 449.
00;00;37;07 – 00;01;03;22
MIKE
New crop December up four and a half at four 67th July. Soybeans up $0.12 at 1170. Meanwhile new crop November up a nickel at 1135. And the July wheat futures contract out of Chicago down $0.04 at 587. Our guest today is Brian Olson. He’s a professor and crops economist at North Dakota State University. And we are going to talk today about the USDA’s June Acreage report, which comes up on Friday the 28th.
00;01;03;22 – 00;01;27;19
MIKE
And what we’re trying to do is to really figure out from brain also, other economists this week as to how accurate the USDA’s numbers are in the June acreage report versus what they estimated in the March prospective plantings report. And with that, we do want to inform you that in March, the USDA estimated US corn acreage this year at 90 million acres.
00;01;27;21 – 00;01;55;28
MIKE
And if realized, of course, that would be 4 million acres less than last year for soybeans. USDA in March estimated 86.5 million. That’s about 2 million more than last year. If realized. And of course, that all wheat acres was 47.5, about 2 million less than last year. So with that, we want to help our listeners understand how USDA gets this midyear estimate and how it compares with its March planting intentions estimate.
00;01;56;01 – 00;02;22;18
FRAYNE
Okay, so let’s talk a little bit about the process and procedures that USDA uses because their solicitors standing about how national statistics does that. So both some march prospective plantings as well as the June acreage reports. Both of those are farmer based surveys. So this is all about what farmers are telling them. So if there’s a difference between the march and the June and the June and the final, most of that difference is estimation problems at the farm level.
00;02;22;18 – 00;02;44;01
FRAYNE
It’s not necessarily USDA because all they’re doing is compiling the survey results. A couple of things also with that. So I don’t want to put all the blame on farmers. Right. Because USDA has procedures and they’re very kind of open about how they do things. But the process that’s used, and that’s one of the advantages I see from using the USDA data versus like a private forecasting company.
00;02;44;02 – 00;03;04;10
FRAYNE
Okay. So two things. Number one, USDA, their samples are always much larger than anything that a private analyst or someone else would do from a sample size. Number one. And then number two, they’re trying to be very statistically correct. I mean, these are people that have their PhDs and statistics, and so they know how to do sampling. They’re trying really hard to make it representative.
00;03;04;10 – 00;03;27;15
FRAYNE
So they’re not only worried about like the core corn Belt Iowa, Illinois, Indiana, Nebraska. They’re also trying to take up what are some of the what I call transition zones, those minor producing areas like in North Dakota, where we swing back and forth a lot between acreages. So they’re trying to make sure that they get enough samples from, like, a North Dakota or a Missouri or an Oklahoma to make sure that we get the core number right.
00;03;27;21 – 00;03;35;27
MIKE
What is the return of USDA surveys from farmers? I understand USDA officials are getting upset with more and more farmers not returning the service.
00;03;36;02 – 00;03;54;28
FRAYNE
Oh, they haven’t, and if you look at the end of each report, you pull some of the language and verbiage from there, like accuracy checks. They also have a couple paragraphs about kind of a survey method that they use and how many surveys that were included, how many farmers had been surveyed to get these results. So two things are going on.
00;03;54;28 – 00;04;15;15
FRAYNE
Yeah, they’re sending out a lot of surveys. They’re only getting a portion of them back. And the number of surveys being returned is also dropping. Now some of that can simply be explained by there’s fewer farmers. Right. We continue to get consolidation of farmers. And there’s also some farmers that just won’t answer the surveys. And they are very concerned about that.
00;04;15;15 – 00;04;35;03
FRAYNE
They’re trying to be as accurate as possible. And if you get a certain type of farmer, a certain demographics of farmer, that won’t answer, then all of a sudden, you know, you have a problem, right? You’re not picking up all of the surveys. So for example, just a hypothetical. Let’s say it was only really small farmers that answered the questions and the really big farmers did not.
00;04;35;03 – 00;04;52;13
FRAYNE
Well, now you have some sampling bias and we have to be concerned about that. Right? It’s not necessarily because they’re smaller or larger. It’s that, you know, a larger farmer might have a different, well, let’s say like up here in North Dakota, right? A larger farmer, there’s a higher probability that they’re going to have some prevented planting if it gets really wet.
00;04;52;13 – 00;05;14;00
FRAYNE
So there is this kind of sampling differences or problems that go on now between the March report and the June reports. They try very hard to go back to the same farmers. So in the March report, the way the question is asked is what are your planting intentions? What are you intending to plant as of, you know, first couple of weeks in March, knowing that that can change.
00;05;14;01 – 00;05;40;12
FRAYNE
You can change based on prices. You can change on weather conditions, you can change on, you know, a gazillion different things. What you know today, what is your plan? That’s the March 31st Prospective Plantings report. Okay. Now in June, the June report, they’re saying, well, what did you actually see? There is a drop off. If you look at the numbers, there’s usually about 77,000 farmers respond to the March report and there’s about 65,000 a report on the June.
00;05;40;13 – 00;06;01;15
FRAYNE
They do lose some. There’s some people that reported initial that don’t report and then follow up. So there is a little bit difference in sampling. But you know even with 65,000 I mean that’s still pretty good sample size you know like across the U.S.. And they have that broken down. So there’s usually like in North Dakota, there’s usually about 450 farmers in North Dakota that respond and give us the numbers for North Dakota.
00;06;01;15 – 00;06;21;04
FRAYNE
When they’re surveying, they say farmer X, what do you intending to plant? And they said, well, I’m going to have this many acres of corn, as many acres of soybeans, as many acres of wheat. Okay. And so that one person provides data for like up here, 4 or 5 different crops. So it’s not that they’re just surveying for corn only and then soybean only separate.
00;06;21;04 – 00;06;39;24
FRAYNE
So we do have a drop off in respondents. The number of people that respond to the second one versus the first one does drop off for whatever reason. They don’t reply the second time. And if you watch those numbers, the number of people that actually do respond that has slowly, slowly shrunk over the last ten years, I’ve been watching that.
00;06;39;24 – 00;06;54;13
FRAYNE
And it is slowly comes down a little bit every year. And again, some of that could be just people don’t want to respond anymore. Some of it is we got less farmers, you know, there’s a lot of reasons for that. But you’re absolutely right. USDA is getting frustrated that they do all this work and they try and send out these surveys.
00;06;54;13 – 00;07;10;24
FRAYNE
You know, farmers complain about the results and they don’t participate. I’ve stood up in front of farmer meetings and talked about this before, and I wag my finger and I said, guys, if you don’t like the numbers, they’re your numbers. You know, there’s always a few guys. So yeah, but I don’t respond. And there’s always one guy in the back row that says, well, don’t they know we lie so well?
00;07;10;24 – 00;07;27;17
FRAYNE
Okay, so you lie. All right. We know that. In fact, if you put down, I’m going to plant 10,000 acres of soybeans and five acres of corn. You know, they’re going to surrender. Survey out. I mean, they’re not stupid. Okay. Number one. Okay. Number two, if you do lie, right, I mean, you purposely try and put in the wrong numbers.
00;07;27;17 – 00;07;53;19
FRAYNE
You know, if you overestimate, there’s going to be some that will underestimate. And so there’s this thing in statistics about if you have a large enough sample, you have enough people responding. The average number is still going to come in really close to the real average. So there’s actually statistical theory that says if you have enough samples, if you have enough people responding, even though the people are either purposely putting in the wrong number or accidentally put the wrong number in, you’re still going to come pretty close.
00;07;53;19 – 00;08;12;23
FRAYNE
For the average. It’ll take care of itself. Some people overestimate, some people underestimate. They kind of wash each other out when you sample. When you do a survey versus look at everybody do a population like a census, if you have a large enough number of people responding, those two numbers for an average are going to come very, very close, very close.
00;08;12;24 – 00;08;41;19
FRAYNE
So now let’s talk about the final numbers. How does USDA get that final January number. There’s actually three sources of data for the final January number. They do a farmer survey and that’s voluntary response. And then they cross-check those numbers with what farmers report to FSA and with what farmers report to me. So FSA being the farm program and Army being crop insurance, the difference if I lie on my Nass survey, you know, there’s no penalty for that.
00;08;41;19 – 00;09;04;15
FRAYNE
If I purposely misrepresent data on my FSA or purposely misrepresent data on my army, that’s a felony. I can go to jail. I know of farmers that have gone to jail because they misreported or misrepresented their numbers on both FSA and Army, because you’re taking money from the government. Now. I want to be really careful here. Not every farmer in the U.S signs up for the farm program.
00;09;04;15 – 00;09;25;16
FRAYNE
Not every farmer in the U.S signs up for crop insurance, so the numbers aren’t going to exactly match. Now, up here in North Dakota, for example, almost every farmer in the state signed up for the farm program and signs up for crop insurance. And so those numbers are going to be really, really close. The averages, the planted acreage and harvested acreage numbers between those three.
00;09;25;16 – 00;09;42;09
FRAYNE
A sample of the farmers, as well as FSA numbers and army numbers are going to be really close together. They will never be the same, but they’re going to be pretty close. And that’s how they cross-check. They don’t cross check to say, oh, Bob, you answered this on your survey and this at FSA and this and you know, you’re wrong.
00;09;42;11 – 00;09;59;21
FRAYNE
It’s like, no, no, no. They take the averages, you know. So they’re looking at county averages. They’re looking at statewide averages. They’re looking at national averages. They’re not looking at individual people. They’re doing the statistics are saying what was the average reported for this area or this region. And they’re cross-checking that to make sure that there aren’t big discrepancies.
00;09;59;21 – 00;10;20;11
FRAYNE
And if there are big discrepancies, then you start diving into the numbers would have been say, okay, can we explain why that might have occurred? So that final acreage number for both harvested acreage and yields, because they do the same thing with yields. Those are pretty accurate. They’ve got three data sources from essentially the same people. And they’re cross-checking making sure that nothing looks too wacky.
00;10;20;11 – 00;10;26;26
FRAYNE
Those are the three. So you got the Nass survey. You got Army reporting got FSA reporting. Those are the three data sources.
00;10;27;01 – 00;10;57;04
MIKE
How accurate are USDA estimates between the March and June reports and what can we expect? We have done some research at least the last ten years on average. The difference between the March and June reports for corn is 26,000 less acres in June than in the march. Now for soybeans, we found that on average in the past ten years, the March and June reports had a difference of 402,000 acres for soybeans.
00;10;57;09 – 00;11;12;07
MIKE
In other words, the USDA had 402,000 more soybean acres in its June estimate than it did in March. But let’s take a look at this frame. How accurate are USDA estimates between the March and June reports and what can we expect?
00;11;12;07 – 00;11;38;24
FRAYNE
Let’s talk about why would there be a difference between March and June? Because again, the assumption is that somehow USDA is generating these numbers through some big algorithm. It’s like, no, they’re surveying farmers and they’re reporting the survey results. So this is what farmers are telling Nass they have done or planning to do. And so the discrepancy you the difference is essentially the change in what farmers thought they were going to do versus what they actually.
00;11;38;26 – 00;12;02;21
FRAYNE
My point is the implication I talk about this a lot. I’m not trying to say that farmers are wrong, but the implication is that somehow USDA is missing their estimates. This is a USDA problem, and USDA is consistently too high or consistently too low. It’s like, no, no, no, no guys. No. They’re using the exact same process. The reason you’re getting differences is because farmers changed their plans.
00;12;02;21 – 00;12;09;06
FRAYNE
USDA didn’t change their process at all. The reason there’s a difference is because some rumors changed their plans.
00;12;09;09 – 00;12;23;10
MIKE
Well, this is a year of good planting progress. Corn is essentially done. Soybean planting at 93% as of June 16th. Does this indicate there might not be a lot of changes in acreage estimates from the March to June reports?
00;12;23;12 – 00;12;43;23
FRAYNE
Right. Okay. So let’s talk about the crop progress report. How is the data for the crop progress report. It’s not somebody in DC and a computer either making stuff up every week. How do they get those numbers. So there’s typically what they like to do is use what they call air quotes egg professional. They’re either going to go to an extension agent in that county.
00;12;43;23 – 00;13;04;13
FRAYNE
What they’re trying to do is get county level data. So they either use the extension agent and request that the extension agent send in the reports, or they go to the FSA county director and they ask to put in their reports. It’s a subjective estimate. Every Tuesday morning at Ndsu, we have a conference call with the crop science people.
00;13;04;15 – 00;13;21;00
FRAYNE
And with all this kind of the state specialist as well as an area specialist, and some of the county people join us as well. And so we talk a little bit about, you know, what are the county agency going on in their particular counties, how much rain to get? What about planting progress, frost damage to snow, insect problems.
00;13;21;00 – 00;13;40;02
FRAYNE
You got aphid problems coming up right. Weights, agronomy questions. And several of them talk about what they reported on their weekly updates that they send in to USDA, Nass, and some of them literally. I know a couple of them that every Sunday they’ll jump in the car and they’ll make the exact same route to do the exact same trip around the county.
00;13;40;02 – 00;13;57;25
FRAYNE
And one guy, you know, we said, yeah, we all start at home after church. We drive around the county, we stop at the local dairy Queen and pick up some ice cream every Sunday. That’s their Sunday drive. And they’ve done it for years. That’s a he and his wife. That’s what they do, right? Other agents will call up a few handful of farmers that say, hey, how are you doing on your you’re planting?
00;13;57;26 – 00;14;11;26
FRAYNE
Because when you drive around the county and you say, well, I can tell you how many fields have been planted, but I don’t know what the intended planting is for that particular field. So many agents will try that again. For the farmers, you don’t treat for farmers say, hey, how you coming? You know what kind of progress you make this week?
00;14;11;27 – 00;14;27;23
FRAYNE
What would you say? How far along aren’t. And then they’ll fill in that in. And and that’s both the planting progress numbers. And then also the crop condition of crop and just a ratings or is a subjective assessment of how good is the crop look. And the joke is yeah, it’s a 260 assessment. You got both windows rolled down and driving 60 miles an hour.
00;14;27;24 – 00;14;47;21
FRAYNE
They send it in to USDA. It’s usually required that they send it in by certain time on the Sunday. Acknowledge it. It’s a later date electronically. And so they get the run button on the statistics. And by Monday afternoon they split the answers out. But if you notice, they do only by state. They do statewide averages. So what happens if we have a county agent last year that leaves.
00;14;47;21 – 00;15;05;02
FRAYNE
So we got a new county agent. Do you think they might assess things a little differently? Or if all of a sudden the county FSC director says, now I’m not going to do it this year. I’ll hand it off to the county agent, but then do it again. It’s this averaging thing. So in Iowa they have, one has got 102 counties in North Dakota, we have 53 counties.
00;15;05;02 – 00;15;20;27
FRAYNE
They’re both about the same land area, Iowa and North Dakota, about the same size. Iowa has over 150 to 80. So we get 53 data points theoretically from North Dakota. You got a little over 100 data points, which is going to be more accurate. Probably the Iowa one. Right. Because they got more counties. It’s a numbers game. Right.
00;15;20;27 – 00;15;41;04
FRAYNE
So my point is yeah it’s the crop progress report is extremely valuable. It provides a lot of really good information. What I always recommend people do is be very careful about comparing this year’s numbers to last year’s numbers to the year before numbers. You can do it. And I know a lot of people do gives you some information, gives you a ballpark or reference point or we had or behind.
00;15;41;04 – 00;16;01;26
FRAYNE
But you had to realize that the people filling that out might be different. What I do think is pretty and accurate is saying, well, how are we doing last week versus this week? Probably it’s the same people answering the same question a week apart. One person might say would be a good looking crop. Another person might say, well, that’s a poor looking crop because it’s subjective.
00;16;01;26 – 00;16;15;12
FRAYNE
Biased. I mean, it’s a subjective assessment. But if I’m consistently I say, well, it went from a poor to a good or good to an excellent, you know, it went up. Did it go up, did it go down to, to stay about the same? You can have three people look at the same crop and they might assess it different.
00;16;15;12 – 00;16;35;15
FRAYNE
So again I think there are some people that are putting a lot more pressure on the numbers, a lot more pressure on these reports than they really should. You got to understand how they’re being prepared and what information really does provide. It’s very valuable data. It’s very valuable because we can monitor and watch what happens very quickly across the whole country.
00;16;35;15 – 00;16;52;22
FRAYNE
You can say, yeah, I was getting behind an Illinois, a great that’s good information to know. Can’t put it in context. You’ve got to put it in the right framework. My point is that people filling out the crop progress report are different from the people that are showing up there. I’ve seen it. I know what some of the the analysts and even some reporters are doing.
00;16;52;22 – 00;17;10;29
FRAYNE
You’re saying, well, if the prospective planning report says so many acres are going to be planted in the state, and the crop progress report says we’re 47% complete, that means this many acres have not been planted. And I’m going, I see your math, but I don’t know how accurate that is. Okay, so let’s pick our North Dakota. Let’s pick on soybeans for just a minute.
00;17;10;29 – 00;17;36;18
FRAYNE
Now North Dakota’s become a pretty big soybeans. The density of the crop, how many acres and also what the yield potential is vary significantly across the state. So the best soybeans, the highest yielding soybeans, the most highest density of soybean acres is in the southeast corner, right in the corner of Minnesota and South Dakota. And as you become further north and further west, that density of acreage drops off and the yield potential drops off.
00;17;36;21 – 00;17;55;26
FRAYNE
So by the time you get up to the northwest corner of the state, soybeans is an anomaly. This isn’t Iowa, where you have, like soybean acres equally spread across the whole state and corn acres equally spread across the whole state. We have a big concentration in the southeast corner, and almost nothing in the northwest corner, because the soil types and the rainfall.
00;17;55;26 – 00;18;18;01
FRAYNE
So the soil types are very different. We’re in the shadow of the Rocky Mountains, so western North Dakota gets a lot less by half. The rainfall in eastern North Dakota has. There’s some really stark differences between across the state. So my whole point of bringing this up. All right. So we talk about percent planted okay. Well we could have the acres in the southeast corner of the state all get planted.
00;18;18;05 – 00;18;35;02
FRAYNE
We had a huge amount of rainfall on the central portion of the state. Any time it rains, we got a little water puddles all over our fields. Okay. Which means it kind of slow slip our planting progression. And obviously you like to wait for the whole field to dry out and do it all in one chunk instead of having going around all these little spots that have to come back later, replant.
00;18;35;07 – 00;18;53;06
FRAYNE
You can have the big core producing region of the state, have almost ideal growing issues, has got planted really early, really fast, and then the other part of the state be really wet and behind. You can say, oh well, North Dakota is only about, you know, 35% planted, but also 35% was in that southeast corner where all the soybeans are.
00;18;53;06 – 00;19;09;02
FRAYNE
Do you count bushels instead of acres? Yeah. You’re talking like 85% of the bushels just got planted. We’re not going to have a problem. But when you look at the acreage say, oh yeah, no, we’re only 35% planted. Well, yeah, because the soybeans ahead of the planted are only 25 bushel leaves. I mean, I’m being sarcastic, but you see where I’m going with this?
00;19;09;04 – 00;19;35;24
FRAYNE
I understand your questions. They’re very good questions. And these issues and the things you’re talking about need to be presented because I think there are people that are they’re not purposely misrepresenting. They’re making some really big assumptions about how the information is being collected, how it’s being reported and what it really represents. So they’re doing some really quick math and making some judgments on what they think is going to happen and misunderstanding of what’s going on.
00;19;35;24 – 00;19;37;02
FRAYNE
This comes in the problems.
00;19;37;04 – 00;19;54;00
MIKE
Well, thanks again to Doctor Frayne Olson, professor and crops economist at North Dakota State University. And thank you for joining us today. If you’ve enjoyed listening to From the Furrow, be sure to tell a friend or to and subscribe to us wherever you listen to your podcast. Thank you to the Ever Insights Crew for their work on today’s show.
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