Focus on Ag: Crop markets are a spectrum of stability, uncertainty

Kent Thiesse
Farm Management Analyst
Kent Thiesse

The U.S. Department of Agriculture World Agricultural Supply and Demand Estimates (WASDE) Report released on June 10 lowered 2021-2022 corn export estimates by 50 million bushels and increased 2021-2022 corn ending stocks by 45 million bushels. This increase in corn ending stocks was somewhat of a surprise to many grain marketing analysts given the tight local corn supplies that exist in many areas of the United States.

USDA decreased the 2021-2022 soybean carryout numbers from the May estimates.

The number of 2022 planted corn and soybean acres, the national average yields, and the estimated total 2021 production of both crops were unchanged from the May estimates.

USDA made very few changes in the wheat estimates for either 2021-2022 or the projections for 2022-2023.

Most grain marketing analysts viewed the June WASDE report as generally bearish for the corn market, somewhat bullish for soybeans, and mainly neutral for wheat; however, there is a high degree of uncertainty with all of the crops. The supply, production, ending stocks and price projections in the WASDE Report are for the 2021-2022 and 2022-2023 marketing years.

The USDA marketing year for corn and soybeans for the 2021-2022 began on September 1, 2021, and ends on August 31, 2022 and the 2022-2023 marketing year ends begins on September 1, 2022 and ends on August 31, 2023. The 2021-2022 marketing year USDA marketing year for wheat ended on May 31, 2022 and extends from June 1, 2022 to May 31, 2023 for the 2022-2023 marketing year.

Keep your eyes and ears out for corn

The USDA projected reduction of 50 million bushels in U.S. corn export levels resulted in the corn ending stocks for 2021-2022 being estimated at 1.485 billion bushels, which is an increase of 45 million bushels from the May estimate. The 2021-2022 corn ending stocks estimate compares to 1.24 billion bushels in 2020-2021, 1.92 billion bushels in 2019-2020 and 2.19 bushels in 2018-2019.

The projected corn supply for the balance of the 2021-2022 marketing year remains quite tight, which is likely to maintain strong support for “old crop” corn prices. Farmers with some of last year’s corn still in storage will want watch for rallies in local cash corn bids in the coming weeks to take advantage of the very favorable cash corn prices and corn basis levels that are positive or quite tight.

USDA kept the projected total estimated 2022 U.S. corn production at 14.46 billion bushels, which was the same as the May WASDE Report. The 2022 estimate compares to 15.11 billion bushels in 2021, 14.18 billion bushels in 2020 and 13.6 billion bushels in 2019. The current record for U.S. corn production is 15.15 billion bushels in 2016.

The projected U.S. corn yield in the June report for 2022 is 177 bushels per acre, which is the same as the May estimate and is the same as the record average U.S. corn yield last year in 2021. The 2022 yield projection compares to other recent national average corn yields of 172 bushels per acre in 2020, 167.4 bushels per acre in 2019 and 176.4 bushels per acre in 2018.

The WASDE report projects 2022 planted corn acres in the U.S at 89.5 million acres and harvested acres at 81.7 million acres, which compares to harvested acres of 85.4 million acres in 2021 and 82.5 million acres in 2020.

Based on the decrease in U.S. corn acreage and a similar national average corn yield, USDA is projecting a decrease in the corn ending stocks by the end of the 2022-2023 marketing year on August 31, 2023 as compared to 2021-2022 carryout levels. The 2022-2023 carryover is estimated at 1.3 billion bushels, which was an increase of 40 million bushels from the May estimate that was due to impacts of the increased 2021-22 corn carryout projections.

In the coming months, many grain marketing analysts will be focusing on U.S. corn production estimates for 2022, given the later than normal planting season and some prevent plant acres in the Upper Midwest, along with the potential for developing drought conditions in other areas, which could strengthen future corn prices.

The June 10 WASDE report increased the projected average U.S “on-farm” corn price for the 2021-2022 marketing year to $5.95 per bushel, which was an increase of $.30 per bushel from the May estimate. USDA left the estimated 2022-2023 corn price unchanged from the May estimate at $6.75 per bushel.

The most recent USDA corn price projections are considerably higher than the final U.S. average corn prices of $4.53 per bushel for 2020-2021, $3.56 per bushel for 2019-2020, $3.61 per bushel in 2018-2019 and $3.36 per bushel for 2017-2018.

Corn price movements have been mixed in recent weeks. Local cash corn prices in southern Minnesota remain near $7.50 to $8.00 per bushel at many locations, with 2022 “new crop” corn bids near $6.50 to $7.00 per bushel.

Soybean stocks low, but remain a 'wild card'

Based on the June 10 WASDE report, the projected soybean ending stocks for 2021-2022 were decreased by 30 million bushels to an adjusted carryout level of 205 million bushels based on an increase of 30 million bushels in soybean export levels for 2021-2022.

The estimated 2021-2022 soybean ending stocks compare to carryover levels of 256 million bushels in 2020-2021, 525 million bushels in 2019-2020 and nearly 1 billion bushels in 2018-19.

The soybean ending stocks for 2022-2023 are now estimated at 280 million bushels, which was also a decrease of 30 million bushels from the May estimate. The 2022-2023 ending stocks figure includes continued strong soybean export levels in 2022-2023. The soybean export levels have largely been driven by significant soybean sales to China in the past two years, which have not shown any signs of slowing down at this point.

One “wild card” in the WASDE soybean estimates for 2022-2023 may be the 2022 U.S. soybean production level. USDA left the 2022 planted soybean acres at 91 million acres and projected U.S. average soybean yield at 51.5 bushels per acre, which are the same as the May estimates.

Some experts feel that U.S. soybean acreage could be adjusted in the June 30 USDA Crop Acreage Report, due to the late planting in the Upper Midwest. Marketing analysts will also be keeping a close eye on the national average soybean yield, which could be highly variable in future months, depending on growing season weather patterns across soybean production areas in the U.S.

The June 10 WASDE report increased the projected average U.S “on-farm” soybean price for the 2022-2023 marketing year by $.30 per bushel from the May estimate, with the 2022-23 price estimate now at $14.70 per bushel. USDA is estimating the average soybean price for the 2021-22 marketing year, which ends on August 31, 2022, at $13.35 per bushel, which was an increase of $.10 per bushel from the May estimate.

The latest USDA soybean price projections are considerably higher than recent national average soybean prices of $10.80 per bushel in 2020-21, $8.57 per bushel for 2019-20, and $8.48 per bushel for 2018-19. Cash soybean prices in southern Minnesota have remained quite strong in recent weeks, trading at $16.00 to $17.00 per bushel at many locations.

The “old crop” prices have been enhanced by positive basis levels due to very tight local supplies of soybeans in many portions of the region. New crop soybean prices for 2022 in southern Minnesota were generally $14.00 to $15.00 per bushel following the June 10 report.

What about wheat?

USDA made no changes in the 2021-2022 wheat demand or carryout numbers in the latest WASDE report. The projected wheat ending stocks for 2021-2022 are projected at 655 million bushels and the estimated 2021-22 farm level price is estimated at $7.70 per bushel.

USDA is estimating total 2022 wheat acres at 47.4 million acres and a 2022 U.S. average wheat yield of 46.9 bushels per acre, resulting in a total production level of 1.74 billion bushels. The acreage level was unchanged from the May USDA report, and the U.S. average wheat yield was actually increased slightly from 46.6 bushels per acre in May.

The wheat acreage and yield figures are being questioned by some analysts given the very late planting dates and potential prevent plant acres in the primary spring wheat production areas of North Dakota and northwest Minnesota. USDA is projecting the 2022-2023 wheat ending stocks at 627 million bushels and the estimated 2022-2023 U.S. average wheat price at $10.75 per bushel.

For additional information contact Kent Thiesse, farm management analyst and senior vice president, MinnStar Bank, Lake Crystal, Minn., at 507-381-7960 or kent.thiesse@minnstarbank.com.