Annual Market Outlooks

The Long View: Grain Market Expectations To 2030

Wed, 26 Jul 2023 17:14:24 GMT

Increasing demand and economic recovery create stable outlook

The COVID-19 pandemic delivered a lasting blow to the global economy. As it slowly recovers, rising global demand for diversified diets and protein will continue to stimulate import demand for feed grains and soybeans, according to USDA’s Agricultural Projections to 2030.

Increased demand for these crops — as well as for wheat, rice and cotton — will be coupled with rising competition from countries such as Brazil, Argentina, the European Union (EU) and the Black Sea region.

Although strong trade competition continues, USDA reports U.S. commodities remain generally competitive in global agricultural markets.

Agricultural exports are expected to grow at an annual rate averaging 2% per year for the rest of the decade. For 2021, U.S. total agricultural exports are projected to increase by 12% to within $350 million of the 2014 record level because of higher prices and stronger export quantities of major field crops

FOCUS ON DEMAND

Corn prices are projected to fall from $3.65 per bushel in 2021/22 to $3.55 in 2024/25, but then remain stable. Growth in domestic corn demand is strongest for feed and residual use, driven by domestic meat production to meet both domestic and export demand for beef, pork and poultry.

Soybean prices are projected to start at $10 per bushel in 2021/22, and to fall through 2025/26 before slowly rising the remainder of the projection period. USDA projects Brazil will take the biggest share of China’s future soybean demand, but U.S. exports and prices also benefit from revived Chinese demand.

2023 Weather Outlook: Ready the Snowplow

Thu, 20 Jul 2023 19:37:11 GMT

Be ready for a colder and snowier winter versus recent years

Persistent drought in the West had producers yearning for precipitation all year. The solution might come in the form of winter weather events, according to some ag meteorologists.

The back-half of December, which quickly turned cold, will continue into January, says Bret Walts, lead ag meteorologist at BAMWX.
“High pressure above the high-latitude areas will likely allow colder-than-normal temperatures to persist across the northern and eastern U.S. for January,” he says. “This looks to be a pattern that is a bit less favorable for snow in the Plains but will remain active in the winter storm department across the East.”

In February, Walts predicts the southeastern U.S. will warm up, as the below-normal temperature levels will stay in the central and western portions of the U.S.

“This should set the stage for an active month of winter weather for the Plains and Midwest, with frequent bouts of very cold air in the Northern Plains,” he says.

However, Walts says February will find the eastern third of the country might start to get some tastes of spring with a warmer March on the way in the East.

Cold Temperatures to Start 2023

Frigid temperatures are forecast to be widespread during the first two months of 2023, according to data from BAMWX.

LACKLUSTER LA NIÑA

As spring moves in, the La Niña pattern will lose its hold, according to Drew Lerner, senior ag meteorologist at World Weather.
“La Niña is a five-month running mean of sea surface temperatures in the eastern Pacific Ocean,” Lerner says. “Because of this definition, La Niña will remain in place long after sufficient weakening has happened, allowing weather patterns to begin influencing world weather. This is where some forecasters and analysts get the forecast wrong.”

TOO LITTLE, TOO LATE

Lerner says in January, La Niña will be on its way out, paving the way for a potential neutral pattern. This shift will bring wetter weather to the Great Plains and western Corn Belt in February and March, with some relief in late January.

While there will be some beneficial precipitation in the winter months, Lerner says it will yield mild soil moisture improvement.

In the Plains and western Corn Belt, Lerner expects relief in late winter and early spring, followed by dryness. “I think that’ll have a huge influence on the marketplace and spring planting,” he says.

Is the Low for 2023 Grains Already In? “That Depends,” Experts Say

Thu, 22 Dec 2022 21:43:17 GMT

The U.S. farm economy has farmers such as Ben Riensche of Blue Diamond Farming Company in Iowa optimistic about the future.

“I think you can say farming has a pretty good seat on the bus of inflationary times,” Riensche says. “Our output is worth more, it’s highly priced across the end-user space, our asset values are stronger, including farmland, and the machinery we have in our fleet is worth more.”

Riensche says when times are good, he searches for things that can make money while he sleeps.

“I’ve never been through an upcycle like this where I didn’t wish that I used it to get ready for that rainy day,” he says.

Strong farm income is helping him reinvest. According to USDA’s December estimate, net farm income in 2022 is forecast at $160.5 billion. If realized, it would be the highest since 1973 and more than 50% above the 20-year average – when adjusted for inflation. Net cash farm income would be the highest since USDA started keeping these inflation-adjusted numbers back in 1929.

“The last two years have seen exceptional returns to row crop producers,” says Farm Journal Economist Chip Flory. In 2022, grain prices picked up where they left off in 2021— moving higher and staying there. “As we look at the upcoming planting season of the major crops, we are looking at some of the highest profitability levels of the past two decades,” says Dan Basse, president of AgResource Company. “Farmers should lock down some of these margins and prices.”

The Kansas City fed agrees finances are strong. Loan demand is slowing, and bankers say the risk of defaults or collapse remains extremely low heading into the new year.

“When we look at the lending side, we see high levels of liquidity,” says economist Matt Roberts, formerly of Ohio State and now the senior grain and oilseed sector analyst with Terrain. “Overall, we see very low levels of stress in loan portfolios across the country.”

Ag bankers such as Alan Hoskins, president of American Farm Mortgage Company, say the stability and certainty of modern crop insurance helps to limit downside risk.

“Unless we would see commodity prices fall off the table going into 2024, it would certainly look like crop insurance is going to provide some pretty good guarantees,” Hoskins says.

New Demand Driver

The climate focus in Washington is also supporting a new demand driver for U.S. farmers — renewable diesel and sustainable aviation fuel.

“As we build out infrastructure for renewable diesel, we’ve got a 23% increase in U.S. crush rates coming over the next couple years,” Basse says. “Never before have we had 23 new crush facilities, or let’s say upgrades, occurring at the same time. So, there’s bullishness in the background here.”

Flory agrees the current surge in vegetable oil demand is something the industry hasn’t seen before.

“It’s going to change the flow of soybeans and soy products around the world,” he says.

While a new demand driver has the potential to undergird grain markets in the future, it doesn’t mean there won’t be challenges ahead. After hitting near 10-year highs in soybeans corn and wheat, the question is, “What’s next for prices?”

“We really haven’t tipped over yet because we’re not sure about South American production, or next year and whether there’s a drought,” says Alan Brugler of Brugler Marketing and Management. “Prices always fall it’s just how soon.”

“It’s really tough to predict that though because of the global dynamics,” Flory adds. “On an input basis, or on a margin basis, I think maybe we’ve already seen enough of a setback that we could begin another positive move higher and a strong farm economy going forward.”

Is it possible? Yes. Will it happen? The unknowns always remain unknown.

“If the market were to see something like a global recession, or South America has big crops, or in the Black Sea, the war is over, those kinds of things would cause declines in farm income and leave us in a precarious position,” Basse explains. “Heading into 2023 we’re in a good spot. The question is, what do we want to do with the market and the opportunities ahead of us?”

USDA Forecasts Farm Sector Profits to Remain Above Average in 2022

Wed, 05 Oct 2022 18:44:12 GMT

USDA released its latest farm sector profit forecast on Thursday. According it’s estimates, farmers may fare better than previous years in many 2022 balance sheet boxes.

Net Farm Income

Net income, a broad measure of profits, is forecast by USDA at $147.7 billion in calendar year 2022, an increase of $7.3 billion (5.2%) in 2022 relative to 2021.

The 2021 value is an increase of $45.9 billion (48.5%) relative to 2020. When prior years are adjusted for inflation, net farm income in 2021 was at its highest level since 2013.

Net farm income in 2022 would be $0.9 billion (0.6%) lower than in 2021 yet 42.1% above its 20-year average (2002–21) of $104.0 billion in inflation-adjusted dollars.

Net Cash Farm Income

USDA forecasts $168.5 billion in 2022, an increase of $22.1 billion (15.1%) relative to 2021. The 2021 value was $29.6 billion (25.4%) above 2020.

When adjusted for inflation, 2022 net cash farm income is forecast to increase by $13.5 billion (8.7%) from 2021 and be at its highest level since 2012.

Net cash farm income in 2022 would be 34.5% above its 2002–21 average of $125.3 billion. Net cash farm income encompasses cash receipts from farming as well as farm-related income (including government payments) minus cash expenses.

It does not include noncash items — including changes in inventories, economic depreciation, and gross imputed rental income of operator dwellings — reflected in the net farm income measure above.

Cash Receipts

From the sale of agricultural commodities, USDA forecasts cash receipts to increase by $91.7 billion (21.2%, in nominal terms) from 2021 levels to $525.3 billion in 2022.

Total crop receipts are expected to increase by $36.4 billion (15.3%) from their 2021 level following higher receipts for soybeans, corn, and wheat. Total animal/animal product receipts are expected to increase even more from the previous year, by $55.3 billion (28.3%), following increases in receipts for all categories of animal/animal products.

These increases would put total cash receipts in 2022 at their highest level on record, even after adjusting prior years for inflation.

Government Payments

While cash receipts overall are expected to increase in 2022, lower direct government payments and higher production expenses are expected to moderate income growth.

Direct government payments are forecast to fall by $12.8 billion (49.7%) from 2021 to $13.0 billion in 2022. The decrease is expected largely because of lower supplemental and ad hoc disaster assistance for COVID-19 relief in 2022 compared with 2021.

Total Production Expenses

This number, including operator dwelling expenses, are forecast to increase by $66.2 billion (17.8%) to $437.3 billion (in nominal terms) in 2022.

Spending on all categories of expenses is expected to rise with the largest increase in fertilizer-lime-soil conditioner expenditures, up 44%.

Average Net Cash Farm Income

USDA forecasts farm businesses to fall 3.3% from 2021 to $98,200 per farm in 2022 (in nominal terms). However, the regional average net cash farm income outlook is mixed.

For farm businesses located in the Northern Crescent region, average net cash farm income is forecast to increase in 2022, but it is forecast to decline for farm businesses in all other regions when adjusted for inflation.

Farm businesses specializing in dairy are expected to see the largest growth in average net cash farm income in 2022, while those specializing in wheat, cotton, and specialty crops are expected to see the largest declines in 2022.

Farm Sector Equity

Ag equity is expected to increase by $315.6 billion (10.4%) in 2022 to $3.34 trillion in nominal terms.

Farm sector assets are forecast to increase $337.5 billion (9.7%) in 2022 to $3.84 trillion following expected increases in the value of farm real estate assets.

Farm sector debt is forecast to increase by $21.9 billion (4.6%) in 2022 to $496.0 billion in nominal terms but it is forecast to fall by 1.2% when adjusted for inflation.

Debt-to-asset levels for the sector are forecast to improve from 13.56% in 2021 to 12.93% in 2022.

Working capital, which measures the amount of cash available to fund operating expenses after paying off debt due within 12 months, is forecast to fall by 2.6% in 2022.

For more details, visit USDA ‘s site.

More on ag business:

Why You Need to Understand Adjusted Gross Income
USDA Doubles Down on Equipment Gains

All Eyes on South America: Did USDA Trim Production Enough

Thu, 13 Jan 2022 20:23:26 GMT

Dryness in South American prompted USDA to cut production estimates for key countries, such as Brazil, Argentina. The cuts were more aggressive than most analysts expected, says Joe Vaclavik, Standard Grain President.

Here are the current estimates:

Soybeans:

Brazil production: 139 MMT, down from 144 MMT estimate in December, but up 1 MMT from last season’s record crop.
Argentina production: 46.5 MMT, down from 49.5 MMT estimate in December, but up less than 1% from last year.

Corn:

Brazil production: 115 MMT, down from 118 MMT estimate in December, but larger than last year’s crop by 28 MMT.
Argentina production: 54 MMT, down from 54.5 MMT estimate in December

“Those were big cuts from USDA, but it’s not surprising that they didn’t go any lower than that,” says Brian Grete, editor of Pro Farmer . “They typically slow walk those numbers, whether it’s an increase or decrease.”

Listen in as Grete discusses the USDA reports on AgriTalk with host Chip Flory:

Even with the lower production numbers, Grete says, most private firms are calling for even lower corn production.

“Many of them are in the 112 MMT to 113MMT range right now,” he says. “Remember that the first corn crop, which is damaged, only accounts for about a quarter of Brazil’s production. The Safrinha crop accounts for three-quarters and it won’t be planted until after the soybeans are harvested.”

As such, if the weather pattern does change the majority of the Brazilian corn crop could create much higher yields.

“So, I don’t think you can get too aggressive to the downside on the Brazilian corn at this point,” Grete says. “I do think there’s more downside risk in soybeans.”

South American Drought

Very hot and dry conditions persist this week for southern Brazil and Argentina, reports Eric Snodgrass, principal atmospheric scientist with Nutrien Ag Solutions.

“Models continue to produce a cold front that will deliver storms (possibly severe) from Argentina through Rio Grande Do Sul and Uruguay late this weekend into early next week,” he says. “The heaviest rains are forecast for northern Argentina to Rio Grande Do Sul and Uruguay.”

Weather models, Snodgrass says, have been consistent in showing a drying trend for Brazil’s northern and eastern growing regions, which includes Mato Grosso, over the next 10 days.

“This will allow for more rapid harvest progress and planting of the Safrinha crop,” he says.

Markets Shift Focus

With USDA’s big round of reports behind us, the market’s focus will shift, Flory says.

“South American weather is absolutely going to dominate this bean market and the corn market for the near term,” he says. “Then I’m going to say U.S. weather is the next focus — even ahead of demand.”

Read More USDA Report Coverage

USDA’s Final 2021 Crop Production Numbers Are In, Here’s What You Should Know

USDA’s January Reports Reveal Hay Stocks Hit a 10-Year Low in December

USDA: Record US Bean Crop, Lower South American Production

2022 Weather Outlook: La Niña’s Encore

Thu, 30 Dec 2021 19:05:36 GMT

How will she impact drought conditions in 2022?

She’s back. La Niña has developed for the second consecutive year and is expected to last into early 2022.

“This could lead to a return of warm and dry conditions in the new year from southern California to the Southern Plains,” says Brad Rippey, USDA meteorologist. “Areas to the North may fair better, and Midwest areas could turn stormy this winter.”

How La Niña impacts and changes the current drought landscape will be key.

“As of early December, more than 55% of the country is experiencing drought,” Rippey says. “It’s the highest of almost nine years.”

Regions with early-year dryness could be problematic for the Corn Belt, adds Eric Snodgrass, Nutrien Ag Solutions principal atmos-pheric scientist.

“I’ll be watching from Texas to South Carolina because if we see drought development there, it could be an early-season indicator drought could expand North in the growing season,” he says.

WHAT TO WATCH

Beyond La Niña, Snodgrass is watching water temperatures in the Gulf of Alaska.

“The waters there are very cold,” he says. “If they stay cold until next spring or summer, I don’t like that for the Midwest. That’s because there is a decent correlation with cold water in the Gulf of Alaska and the potential for drought in Minnesota and nearby states.”

Here are additional 2022 outlook stories:

2022 Soybean Planting Projections are a Moving Target, Prices will Whipsaw

Drought and Demand Drive the 2022 Wheat Outlook

2022 Outlook: Why Corn’s Sweet Spot May Be Below $6 in the New Year

2022 Outlook: Pork Industry Rises from the Rubble

Don’t miss Eric Snodgrass’ preview of 2022 weather at the Top Producer Summit. Register now at TPSummit.com.

2022 Soybean Planting Projections are a Moving Target, Prices will Whipsaw

Thu, 30 Dec 2021 15:30:27 GMT

With input prices trending higher for corn, some traders in recent weeks have predicted more crop acres could move to soybeans in 2022. Not everyone is on-board with that projection, however.

Arlan Suderman, chief commodities economist for StoneX Group, is looking at production in South America as he ponders 2022 U.S. soybean plantings.

“I think I’m going to struggle (to predict U.S. acres) particularly because Brazil looks like they’re going to have a big crop, and we have yet to see what Argentina is going to do,” Suderman says.

For now, he predicts U.S. farmers will plant 89 million soybean acres next spring – 1.5 million acres above USDA’s current forecast of 87.5 million planted acres.

“I think that 89 million is kind of the top right now for soybean acreage, given soybean’s current price relationship with corn,” Suderman says.

Scott Irwin, University of Illinois agricultural economist, is not optimistic that soybean plantings will go as high as what either Suderman or USDA anticipate. If anything, Irwin expects movement in the opposite direction, based on his economic models which indicate 2022 soybean planted acres in the U.S. will dip to 85.5 million acres. That’s 1.7 million planted acres less than the 87.2 million acres farmers planted this past spring.

Plenty of time for acreage shifts
With the heart of planting season still months away, soybean acreage forecasts have plenty of time to move higher or lower.

Like Suderman, Jon Scheve, Marketing Against the Grain, is keeping a close eye on the Brazil soybean crop. Scheve says dry weather conditions that moved into the southern third of the country’s soybean growing area this past week could exact a yield toll there that would benefit the U.S.

“Over the next 60 days most of Brazil will be in the heart of the flowering stage and the beginning of the pod-fill stage,” Scheve reported on Monday. “Two-week forecasts indicate limited precipitation, and many traders think it might cause a yield reduction.”

In addition to weather, export opportunities will shape market opportunities and U.S. farmers’ planting decisions. Pro Farmer reported on Monday that cumulative soybean export inspections are running 22.8% behind a year ago and that USDA projects soybean exports will decline 9.5% from 2020/21.

“We still have some soft demand coming into China because of poor hog feeding margins, and we’ll need to monitor that,” Suderman adds.

Which way will prices go?
The November USDA World Agricultural Supply and Demand Estimates (WASDE) report pegs the season-average soybean price forecast for 2021/22 is $12.10 per bushel. The price forecast went unchanged in the December report.

Irwin tells farmers to anticipate lower prices further into the new year. His economic models show soybeans at $11 per bushel for 2022/23.

Chip Flory, Farm Journal economist and AgriTalk host, says farmers can expect soybean prices to be whipsawed by a transitioning soy market in 2022.

“Because of renewable diesel and investment in U.S. soybean crush, traders are getting used to the idea of crushing for oil and potentially being buried by meal,” he says. “I’d like to claim knowledge of how this will ultimately impact soybean prices, but it’s a transition I haven’t seen in my 35 years of watching markets.”

Flory shares three trends he’s watching:
1. A year ago, upside price momentum was building. At the beginning of December, “sideways” was the only way to define the trend in new-crop soybean futures.
2. A year ago, China was buying more soybeans as a hedge in case La Niña clipped Brazilian production. This year, China importers appear confident in Brazil’s soybean supply and are waiting for lower U.S. prices to fill demand holes.
3. A year ago, the markets were battling for acres. This year, corn’s rising input prices has the soybean market on the defensive to prevent a big-time switch to soybeans in 2022.

Here are additional 2022 outlook stories:

Drought and Demand Drive the 2022 Wheat Outlook

2022 Outlook: Why Corn’s Sweet Spot May Be Below $6 in the New Year

2022 Outlook: Pork Industry Rises from the Rubble

How High Can Farmland Prices Go?

Wed, 29 Dec 2021 19:43:48 GMT

Prepare for a dynamic farmland market in 2022

The supply-and-demand equation for farmland has shifted. For the past few years, a low supply was met with weaker but adequate demand. So, prices were supported and somewhat steady. In 2021, higher commodity prices and inves-tor interest boosted demand and supply followed suit.

“Over the past 12 months, most areas of the Grain Belt have experienced an increase in the amount of land sold,” says Randy Dickhut, senior vice president of real estate operations for Farmers National Company. “A number of states have seen a 10% or more bump in the number of transactions.”

In 2021, R.D. Schrader, president of Schrader Real Estate and Auction Co., says his firm had twice as many sales above $10,000 per acre as they did in 2019 and 60% more sales above $10,000 per acre than 2020.

“One two-week stretch, ending October and beginning November, provided four sales over $13,000 per acre in In-diana and Ohio,” he says. “It was not unheard of for land to bring 150% of what it had been appraised for in the last year, especially if recreational land was included.”

MORE RECORDS AHEAD?

During the second half of the year, it seemed like every sale was a new record, says Doug Hensley, president of real estate services for Hertz Farm Management. Will this incredible price strength continue?

“In 2022, we may see some new records, but it won’t be at every sale like it seemed to be in 2021,” Hensley says. “I expect the volume of sales to moderate, as some demand has been satisfied. Plus, in 2022, we’re seeing smaller cash flow margins and the potential for higher interest rates, both of these are headwinds compared to 2021.”

At this point, if the fundamental factors supporting land prices continue in the current direction, the market should be firm to somewhat higher, Dickhut says.

“But if any of these underlying factors change or unexpected world or national events come about, the land market could pause and even change direction,” he says. “For now, the outlook for the land market is positive as farmland continues to be a safe, long-term investment.”

Here are additional 2022 outlook stories:

2022 Soybean Planting Projections are a Moving Target, Prices will Whipsaw

Drought and Demand Drive the 2022 Wheat Outlook

2022 Outlook: Why Corn’s Sweet Spot May Be Below $6 in the New Year

2022 Outlook: Pork Industry Rises from the Rubble

Will the Cotton Blanket Cover 12M-plus Acres in 2022? Ask La Niña

Thu, 23 Dec 2021 17:14:26 GMT

Don’t expect the dizzying heights of $1.21 per pound, but the cotton outlook appears relatively solid for 2022. Bouncing up from 11.2 million planted acres in 2021, the Cotton Belt could see 12 million acres in 2022, and possibly more, contingent on a mercurial La Niña.

Fueled by a COVID clampdown and release, cotton’s amazing run from the 50-cent basement in 2020, to a pinnacle of $1.21 in November 2021, bodes well for 2022, with strong prices projected on the near horizon.

Wild Card

How wide might cotton’s blanket stretch in 2022? Scott Stiles , Extension economist with the University of Arkansas System Division of Agriculture, sees 12 million acres as a ballpark figure. “Certainly, we’ve seen some backoff from the extremely high fall prices of 2021, but when you’ve still got December prices trading near 90 cents, that an historically attractive price to growers. Right now, I’d guess acres climb about 900,000 and get us back to around 12 million acres.”

In concurrence with Stiles, John Robinson , Texas A&M University Extension cotton economist, projects approximately 12 million acres—with significant upward leeway. “I think we’ll go a little over 12 million acres, and I have a big question mark over the dryness of La Niña.”

Texas, the perennial U.S. cotton giant with a footprint covering well over half of all nationwide acres each year, is currently under a La Niña advisory. Translated: Growers face drought conditions, a heavyweight concern at planting, particularly for Texas’ large percentage of dryland growers.

“When it’s this dry, and the likely insurance price for cotton is going to be comparatively high, farmers respond by planting more cotton,” Robinson describes. “They put seed in the ground and see what happens. Considering La Niña, there’s a possibility for 500,000 to 1 million more acres of cotton just in Texas. How much of that gets harvested is a separate matter, but I can certainly see how acreage numbers could go up.”

Stiles echoes concerns over dry conditions: “Talk about a wild card: The La Niña effect is very real, and prices will respond if it goes on long enough. One way or the other, that could be a driver for the market. The Lubbock area received below normal rainfall from September to November this year. December tends to be a dry month as well. The High Plains region is now considered to be in ‘moderate’ to ‘severe’ drought. The cotton market will be following this closely in the months ahead.”

Prices?

Planted acres and harvested acres often are separate topics in the Cotton Belt, and the differences frequently are not resolved until the approach of fall. A possible weather-market situation in 2022 could keep prices supported.

“There is potential for strong prices in 2022,” Robinson says, “but I think we’ll return to more of a supply-and-demand rationale for prices, which should put us in the 80s and 90s—not likely over a dollar by next harvest, but still room for strong prices.”

Cotton’s price story dates back roughly 20 months, according to Stiles , and relates to dual key factors: “First, is record world mill use. We came out of COVID, and the general economy opened, and now you see USDA projecting numbers of just over 124 million bales in mill use for the 2021 marketing year, and that’s a record. Second, if inflation is on the horizon, money tends to move into the commodity markets. Speculative money started moving to the long (buy) side of the cotton market during April 2020, when cotton was trading in the low 50-cent area. It was a bargain, and they rode it to well over a buck.”

2022 Outlook: Why Corn’s Sweet Spot May Be Below $6 in the New Year

Tue, 21 Dec 2021 15:24:38 GMT

Corn prices have been on a volatile ride in 2021. Since the beginning of January to today, the December 2021 corn contract rose 34.5%. With a high of $6.36 ½ set on May 7, prices have continued to bounce across the board in a range of more than $1.

As analysts turn their attention to next year, which is creating more of a bullish outlook: corn or soybeans? The answer is mixed, but even with a tapered expectation of corn exports in the New Year, analysts are more optimistic when it comes to the price picture for corn.

“I’m a little bit softer on export demand. China has a lot of corn on the books, but they’re not taking shipment of it. That’s a concern until they start to do so that can always be rolled into the next year,” says Arlan Suderman of StoneX Group.

Despite the concern over the current status of corn exports, AgriTalk Host Chip Flory says corn seems to be finding true demand. He says total corn demand this year was estimated up slightly from last year in USDA’s November Supply and Demand Report.

“Most impressively, that estimate comes with the national average on-farm cash corn price expected to be up 90¢ from 2020-21, and more use at a higher price indicates a ‘real increase’ in demand,” says Flory.

The highlights for Flory include:

Feed and residual use has found a home in the 5.6- to 5.7-billion-bushel range.
Exports won’t reach last year’s level and will fall about 250 million bushels as China finds alternative feeds and alternative sources for feed grains.
The difference is ethanol.

Input Dilemma

Even with a dimmer outlook on corn exports in 2022, Suderman says the key metric to watch is the price of inputs. He says as long as inputs remain high, with some even at record levels, he thinks the price of corn could also remain strong.

“But as far as the U.S. corn market, its primary objective in the months to come is to make sure we plant enough corn with these high fertilizer prices,” he says. “The price of corn has to remain at a level the farmer can afford to pay, and fertilizer prices keep going up. That means the corn price has to go up. But if fertilizer prices break that allows the corn price to break in availability supplies is a factor there too. But we’re not expecting that to be a major problem here in the United States. It will be though and some other competitor nations.”

Matt Bennett of AgMarket.net expects the acreage picture to remain competitive in 2022, as input prices and availability will be a tipping point on acreage for next year. But even with the horror stories about fertilizer prices and availability, he still thinks farmers won’t make a mass exodus away from planting corn. Reports already indicate areas like Missouri are seeing 140% of normal anhydrous ammonia applications for this time of year. And in northeast Iowa, retailer say more nitrogen has been applied this fall compared to last fall. Bennett points out an uptick in fall applied nitrogen this year has been very regional.

“The producers that were hesitant to prepay anhydrous, now they’re betting on not only having the ability to put it on in the spring due to mother nature, but they’re going to be betting on the fact that it’s going to go down from these lofty levels we currently see. So, I think from an acreage standpoint, I still think that 90 million [acres] for soybeans and 90 millions [acres] for corn is what we’ll see in 2022,” says Bennett.

Corn Still Pencils

Flory points out the input price rise seen the second half of 2021 has growers sharpening their pencil and running the numbers on potential returns on 2022 corn and soybeans. At the end of November – despite the rise in fertilizer prices – corn was holding its own.

“Potential net returns for corn in the Midwest were good enough to keep growers committed to crop rotations for 2022,” says Flory. “However, corn’s input costs were also high enough to discourage corn acreage expansion. Unless corn can increase plantings from 2021, odds are corn carryover will remain tight into the 2022-23 marketing year – and likely into the 2023-24 marketing year.”

The Crude Factor

Another factor that could fuel corn prices into the New Year is the price of crude oil. Typically, strong oil prices translate into strong corn prices, and Suderman says even though that may continue to be the case in 2022 he thinks volatility will still be at play.

“I think particularly as long as inflation stays high and crude oil in the energy sector is a big part of that,” says Suderman. “That means that we manage supply and demand at a higher price level than we otherwise would do so. And so we can still have sell offs, we can still have that opportunity, but it means that we see the buying come in at a quicker level to kind of provide some underlying support for this market. “

Searching for Support

Suderman says when you look at the energy situation across the globe, plus potential acreage shakeups in some areas, corn prices could find support in 2022.

“So I think as we go forward, the world’s kind of stays tight on corn for another year with the fertilizer problems that we have with reduced acreage in Europe and in the Black Sea region, reduced fertilizer application rates in Brazil and their Safina crops and dryness risk. I think we stay in there and we keep some support underneath the corn market going forward. And I think it’ll present some opportunities for the US farmer,” Suderman adds. “

“December 2022 corn futures posted a contract high on November 24, 2021, at $5.65. Most market regions sported basis levels that supported $5.25-plus, fall 2022 delivery cash bids,” Flory adds. “Throughout calendar year 2021, I heard Pro Farmer Editor Brian Grete say countless times, “Corn is too cheap at $5 and too high-priced at $6.” I think I’ll hear it from Brian several times in the year ahead, as well.”

2021 Row Crop Market Outlooks Roundup

Mon, 28 Dec 2020 22:25:06 GMT

The editors at AgWeb.com are looking at experts’ projections for a variety of commodities in 2021 to help you succeed and be profitable in the coming year. Here’s a look at what analysts are expecting for the upcoming growing season.

2021 Outlook: Is the Stage Set for $5 Corn in the New Year?

Unprecedented corn price momentum this fall was driven largely by demand. As analysts focus on 2021, Dan Basse of AgResource Company explains why the stage may be set for an ag bull market to drive prices even higher. Read more .

2021 Soybean Outlook: Low Carryover, Higher Price Boost Acreage Projections

USDA predicts 89 million soybean acres in 2021. Some analysts believe that number could go even higher. Read more .

U.S. Wheat Prices Move Higher As Global Supply Concerns Intensify

The possibility exportable supplies could be tight in 2021, depending on how the weather plays out, particularly in Russia and the U.S., is encouraging as high of prices we’ve seen in five to six years, says Arlan Suderman, chief commodities economist at StoneX Group Inc. Read more .

13 Million Acres of Cotton in the Cards for 2021?

It was a nasty year for cotton growers in a Corona-crowned 2020. Book-ended by 73 cents in January, and 77 cents in December, cotton fell into an April abyss—dropping to 50 cents, an 11-year low. What is the profit potential for a cotton producer in 2021? Read more .

Visit AgWeb’s Market Outlooks page for a full list of our 2021 Outlook pieces .

More stories from the 2021 Outlook series:

2021 Soybean Outlook: Low Carryover, Higher Price Boost Acreage Projections

Tue, 22 Dec 2020 22:31:37 GMT

Farmers planning their crop acreage mix for 2021 – and evaluating how soybeans will fit into that – have some good news on the pricing front to consider in the process.

On Thursday, USDA projected the season-average soybean price for 2020/21 at $10.55 per bushel – up 15 cents from the agency’s November World Agricultural Supply and Demand Estimates (WASDE) report. This would be the highest price for soybeans since 2014, when price reached $10.10 per bushel.

The agency also lowered its projection on ending stocks for soybeans from 190 million bushels to 175 million bushels. If realized, ending stocks would be the lowest since 2013/14.

With the anticipation of lower ending stocks and higher prices, the USDA projects 2021 soybean acreage will total 89 million planted acres.

The marketplace expressed disappointment in USDA’s report – particularly since the projected drop in carryover bushels was based on increased domestic crush and not export demand – and commodity prices dipped, as a result.

Still, Chad Hart, Iowa State University economist, says “all signals point to exports continuing to grow.”

Hart told AgriTalk’s Chip Flory that he believes USDA projections are headed in the right direction and that the marketplace is trying to add even more acres.

Some analysts are predicting as many as 92 million soybean acres for 2021.

“We’ve never touched that number before, and I’m not going to go that aggressive. I’m in that 90- to 91-million-acre camp,” he told Flory.

But Hart adds, market opportunity and weather conditions will likely dictate total planted acres.

“I’m looking at February, and I think the trade is going to really concentrate on do we see those last residual sales on that export market or not? If we do, I think that will hold that price up there, and we’ll get closer to 91 million acres out there, but 92 million would be a really hard push,” he says.

As for pricing in 2021, Hart says futures are pointing to a $10 season-average cash price.

“It’s a signal to bring (planted) area in, and it’s based upon this really strong demand out there,” he says. “We don’t see the feed (demand) side backing off; we don’t see exports backing off. And so, if anything, that’s putting in a floor right now that could go even higher as we move forward.”

Corn, Soybean Prices Retreat as USDA’s Modest Cuts Disappoint

Here’s Why Traders Weren’t Impressed with USDA’S December Crop Reports

Could Wheat Acres Hit a 110-Year Low in 2020?

Thu, 19 Nov 2020 00:52:54 GMT

For the past two years, wheat acres have dipped to a 100-year low. For 2020, acres could challenge the 110-year low. The reason for the decline is easy to spot.

“Prices are poor, and profit is non-existent for some farmers,” says Kim Anderson, Oklahoma State University Extension economist.

In 2019, all wheat acres totaled 45.2 million, which is a 5% decline from 2018. Wheat acres have been on a steady decline in the U.S. for the past decade. For instance, in 2008, all wheat acres equaled 65 million.

Going forward, acres are expected to stay close to the current level of around 45 million, according to the 2019 U.S. Baseline Outlook compiled by the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri.

Prices are also expected to level out. For 2019/20, FAPRI estimates the U.S. wheat farm price to stick around $5. That price will likely be the average over the next several years.

Forces at Play: Quantity and Quality

Wheat supply and quality are the two major factors influencing price, Anderson says. From a quality standpoint, U.S. wheat is facing stiff competition.

“In the U.S., our 2019 hard red winter wheat crop averaged 11.3% in protein; the Black Sea region, continually ships 12.5% protein,” he says. “So, you have quality issue.”

On the supply side, the world has a glut of wheat:

Global wheat production is at a record 28.1 billion bushels.
World ending stocks are at a record level of 10.6 billion bushels.
Wheat’s global stocks-to-use ratio is at 38.2%, another record level.

The good news in the global data, Anderson says. The Black Sea region (Russia, Ukraine, Kazakhstan) will have a stocks-to-use ratio of 9.6%.

“That tells you if they have problems with 2020 production, they don’t have any room to spare,” he says. “If they have a poor crop, we could see wheat prices get profitable again. But we won’t really know the state of their crop until June/July/August.”

Positive Demand Signs

The bright side of lower prices is they are incentivizing an increase in purchase volume, says Ken Zuckerberg, lead economist, grain and farm supply at CoBank

“Human consumption of wheat has been stable,” he says. “Wheat consumption for feed is increasing, since its price is low in absolute terms and relative to corn.”

USDA expects global wheat consumption to remain at record high levels in 2018/19 due to increased human consumption. Human wheat consumption is expected to reach a record high 602 million metric tons, which is 4% above the five-year average. In the past decade, global human wheat consumption has increased 90 million metric tons, while feed wheat usage has increased 16 million metric tons.

This trend of high consumption could be a positive market signal in the year ahead, Zuckerberg says. It’s beginning to pay off for farmers, as feedlots buy more wheat. “With the shortage of high-quality wheat for next year, we’ve seen an increase in demand, which has caused tight basis especially in Kansas.”

Another encouraging trend in the wheat market is a continuing production efficiency story. “We’ve seen greater yields produced on fewer acres,” he says.

All wheat produced in the U.S. for 2019 hit 1.92 billion bushels, which is higher than 2018’s production on more acres.

As wheat farmers plan their future crops, Zuckerberg encourages them to think about how to capture niche or supplier-driven contracts.

“Wheat is in so much of our value-added food,” he says. “Wheat farmers can be more consumer centric, and we could see a reinvention of the wheat business.”

Annual Market Outlooks

The Long View: Grain Market Expectations To 2030

Increasing demand and economic recovery create stable outlook

FOCUS ON DEMAND

2023 Weather Outlook: Ready the Snowplow

Be ready for a colder and snowier winter versus recent years

Cold Temperatures to Start 2023

LACKLUSTER LA NIÑA

TOO LITTLE, TOO LATE

Is the Low for 2023 Grains Already In? “That Depends,” Experts Say

New Demand Driver

USDA Forecasts Farm Sector Profits to Remain Above Average in 2022

Net Farm Income

Net Cash Farm Income

Cash Receipts

Government Payments

Total Production Expenses

Average Net Cash Farm Income

Farm Sector Equity

All Eyes on South America: Did USDA Trim Production Enough

South American Drought

Markets Shift Focus

2022 Weather Outlook: La Niña’s Encore

How will she impact drought conditions in 2022?

WHAT TO WATCH

Don’t miss Eric Snodgrass’ preview of 2022 weather at the Top Producer Summit. Register now at TPSummit.com.

2022 Soybean Planting Projections are a Moving Target, Prices will Whipsaw

How High Can Farmland Prices Go?

Prepare for a dynamic farmland market in 2022

MORE RECORDS AHEAD?

Will the Cotton Blanket Cover 12M-plus Acres in 2022? Ask La Niña

2022 Outlook: Why Corn’s Sweet Spot May Be Below $6 in the New Year

Input Dilemma

Corn Still Pencils

The Crude Factor

Searching for Support

2021 Row Crop Market Outlooks Roundup

2021 Outlook: Is the Stage Set for $5 Corn in the New Year?

2021 Soybean Outlook: Low Carryover, Higher Price Boost Acreage Projections

U.S. Wheat Prices Move Higher As Global Supply Concerns Intensify

13 Million Acres of Cotton in the Cards for 2021?

2021 Soybean Outlook: Low Carryover, Higher Price Boost Acreage Projections

Could Wheat Acres Hit a 110-Year Low in 2020?

Forces at Play: Quantity and Quality

Positive Demand Signs

Read More 2020 Outlooks