The National Agricultural Statistics Service (NASS) branch of the USDA released its 2009 Prospective Plantings Report this morning. Overall, the results of the report were not too surprising given the current environment of weak markets and elevated input prices, suggesting farm incomes will continue to be strained in 2009.

Forecasts for acreage committed to corn were down 1% to 85 million acres for 2009, while Soybeans were up slightly at 76 million acres. Acreage committed for wheat fell off the most in 2009, down 7% to 56 million acres. Further pressure on corn acreage has evolved as input prices like fertilizer continue to remain elevated. Some acreage has been recommitted to soybeans as the level of inputs tends to be less for beans versus corn.

These forecasts are quite a reversal from the exuberant trends of acreage expansion over the last two years driven largely by commodity price levels. That being said, the reduction in acreage will likely serve to support forward prices for corn, beans and wheat as supply becomes more measured.

Many in the industry feel a higher premium in prices will be required to drive significant acreage expansion in the future, which may be achievable as demand continues to grow globally and is further subsidized through domestic production of ethanol.

Based on the expected reductions in acreage committed for corn and wheat in 2009, we believe this is a significant sign that farmers are stepping in to support commodity prices as the global economy continues to shuffle through a severe global downturn. Although, it may be difficult to fully offset global pricing pressure with simple supply and demand economics.

Corn has fallen recently to $3.90/bushel, well off last year’s highs of $7.65, but remains well above the trailing 10 year average of $2.75/bushel, suggesting the expectation of lower supplies in 2009 is having an impact on forward prices.

The one unknown in the crop projections is the impact of severe weather this spring. We have already witnessed major flooding in the Red River Basin of North Dakota and Minnesota, which is primarily impacting sugarbeet and wheat estimates for in the area.

If we were to see further deterioration in the weather situation across the Midwest and Northern Plains, corn acreage production could be much less than expected, impacting inventories and adding further support for higher prices in 2009.

-GDH