Focus on Ag: January WASDE report offers little change

Kent Thiesse
Farm Market Analyst
Kent Thiesse

The monthly U.S. Department of Agriculture's World Supply and Demand Estimates report released on Jan. 12 was basically viewed as “neutral” by most grain marketing analysts and had a very minimal effect on corn and soybean prices.

The January WASDE report, which is often known as a “market mover”, showed only slight adjustments to final 2021 corn and soybean production numbers and total demand figures; however, the report did show a slight increase in ending stocks for both commodities by the end of the 2021-22 marketing year on Aug. 31, 2022, as compared to estimates in the December WASDE report.

Corn

The National Ag Statistics Service report, which was also released on Jan. 12, estimated the final 2021 U.S. average corn yield at the record level of 177 bushel per acre, which is the same as the December estimate. The 2021 corn yield estimate is an increase from 171.4 bushels per acre in 2020 and 167.5 bushels per acre in 2019. Minnesota is estimated to have a final 2021 statewide average corn yield of 178 bushels, while Iowa is projected to have a record final corn yield at 205 bushels per acre for 2021.

Other estimated average record corn yields for 2021 included Indiana at 195 bushels per acre, Nebraska at 194 bushels per acre, Ohio at 193 bushels per acre and Wisconsin at 180 bushels per acre, with Illinois estimated at 202 bushels per acre. The drought-stricken states of North Dakota and South Dakota are projected to have final 2021 corn yields of 105 and 135 bushels per acre, respectively.

The latest WASDE report showed a slight increase in the total 2021 U.S. corn production, which is now estimated at just over 15.1 billion bushels, representing an increase of approximately 1 billion bushels from 2020 corn production levels. The latest USDA report also showed that the total demand for corn usage in 2021-22 will be only slightly above the 2020-21 usage levels of just over 14.8 billion bushels.

Corn export levels are projected to decrease by 328 million bushels in 2021-22; however, this will be offset in an expected increase of 297 million bushels in corn used for ethanol production in the coming year. USDA listed the projected beginning stocks in the January report at 1.235 billion bushels, which was a reduction from 1.9 billion bushels from a year earlier.

USDA is now estimating 2021-2022 U.S. corn ending stocks at 1.54 billion bushels, which is an increase of 47 million bushels from the December WASDE report. Interestingly, USDA was also projecting 2020-21 corn ending stocks at approximately 1.5 billion bushels a year ago in the January WASDE report. However, the final 2020-21 ending stocks closed at an estimated 1.235 billion bushels on Aug. 31, 2021. The U.S. corn stocks-to-use ratio is now estimated at 10.4% for 2021-22, which would be increase from 8.3% in 2020- 21. The 2021-22 ratio remains fairly tight compared to recent corn stocks-to-use ratios of 13.7% for 2019-20, 14.6% for 2018-19, and 14.5% in 2017-18. This means there could be some potential for short-term rallies in the cash corn market in the coming months, especially in areas of the U.S. with tight supplies and high local corn demand.

USDA is currently estimating the U.S average on-farm cash corn price for 2021-22 at $5.45 per bushel, which is at the same level as the December estimate. The projected 2021-22 market year average corn price represents the highest WASDE estimated average corn price since the 2013-14 marketing year.

The 2021-22 USDA price estimates are the expected average farm-level prices for the 2021 crop from Sept. 1, 2021 to Aug. 31, 2022; however, they do not represent estimated prices for either the 2020 or 2021 calendar year. The current projected 2021-22 average price of $5.45 per bushel compares to national average corn prices of $4.53 per bushel in 2020-21, $3.57 per bushel for 2019-20, $3.61 per bushel for 2018-19, and $3.36 per bushel for both 2017-18 and 2016-17.

Soybeans

The latest National Ag Statistics Service report estimates the final 2021 U.S. average soybean yield at 51.4 bushels per acre, which is just slightly above the final U.S. average yield of 51 bushels per acre in 2020.

Total U.S. soybean production for 2021 is now estimated at 4.435 billion bushels, which is increase of 219 million bushels from final 2020 production levels. The recent WASDE report estimates total soybean demand at 4.357 billion bushels for the 2021-22 marketing year, which is a decline of 147 million bushels from 2020-21 soybean demand.

Soybean crush levels are expected to increase by nearly 50 million bushels in the current marketing year; however, soybean export levels are expected to decline by 215 million bushels during 2021-22.

The U.S. soybean ending stocks for the 2021-22 marketing year in the latest WASDE report are estimated at 350 million bushels, which was an increase of 10 million bushels from the December WASDE report. The projected 2021-22 soybean ending stocks are an increase from the estimated 2020-21 carryout level of 257 million bushels. However, the 2021-22 ending stocks would still be among the lowest in past decade. The projected 2020-21 soybean ending stocks compare to other recent year-end carryout levels of 525 million bushels for 2019-20, 913 million bushels for 2018-19, 438 million bushels for 2017-18 and 302 million bushels in 2016-17.

The soybean stocks-to-use ratio for 2021-22 is now estimated at 8%, compared to 5.7% in 2020-21, which was at the lowest level since 2.6% in 2013. The projected 2021-22 ratio is considerably lower than other recent soybean stocks-to-use ratios of 23% for 2018-19 and 13.3% for 2019-20. The expected rather tight soybean supply may offer some opportunities for continued strong cash soybean prices in the coming months, especially if weather issues in South America continue to develop.

USDA is now projecting the U.S. average farm-level soybean price for the 2021-2022 marketing year at $12.60 per bushel, which was an increase of 50 cents per bushel from the December estimate. The estimated 2021-22 U.S. average soybean price would be the highest since the 2013-14 marketing year. The 2021-22 soybean price estimate of $12.60 per bushel compares to other recent yearly average soybean prices of $10.80 per bushel in 2020-21, $8.57 per bushel for 2019-20, $8.48 per bushel for 2018-19, and $9.35 per bushel for 2017-18.

Marketing decisions

Many farm operators will tell you that grain marketing decisions are the hardest part of farming, which is especially true during periods of highly volatile markets such as we have experienced the past 12 to 18 months. A year ago, December corn futures on the Chicago Board of Trade were around $4.40 per bushel for “new crop” 2021 corn, with a local southern Minnesota 2021 fall harvest price of around $4 per bushel. By May, the futures price had risen to near $5.50 per bushel and the local harvest cash corn price to above $5 per bushel, where prices remained for the balance of 2021.

Similarly, board of trade November soybean futures for 2021 were over $11.50 per bushel in January last year, with a local southern Minnesota harvest price near $11 per bushel for the Fall of 2021. By June, the Chicago Board of Trade November futures price and some local cash soybean bids had topped $13 per bushel; however, by October the local Fall harvest cash price had declined to near $11.50 per bushel.

During 2020 and 2021, many farmers began selling their anticipated corn and soybean production quite aggressively early in the year, once the local cash price got into a profitable price range, thus missing higher potential prices that occurred later in the year. Given the scenarios that existed prior to planting in both years, these were not bad marketing decisions to sell some of the anticipated crop production at profitable levels in order to reduce risk.

Now producers are wondering what to do about protecting prices for the 2022 corn and soybean crop. Being able to lock in local 2022 cash prices over $5 per bushel for corn and over $12 per bushel for soybeans is the best marketing opportunity that we have had prior to spring planting in many years. This may not be a bad place to reduce some financial risk and begin some grain marketing strategies for the 2022 crop year.

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.