Focus on Ag: Corn, soybean prices drop, grain market remains volatile

Kent Thiesse
Farm Management Analyst
Kent Thiesse

The late June USDA Acreage Report is always highly anticipated, because it becomes the first “hard data” after the March U.S. Department of Agriculture's Plantings Intentions Report to give an indication of crop production levels for a given growing season.

Many times, the June USDA Report can have a big impact on grain market trends, either upwards or downwards, and 2022 did not disappoint, with an initial negative market response for both corn and soybeans. Producers planted less acres of corn and more acres of soybeans in 2022 according to the latest USDA crop acreage estimates as of early June. USDA surveyed more than 64,000 agricultural producers during the first two weeks of June to gather information for the June 30th USDA Report. USDA will re-survey crop acreage in Minnesota, North and South Dakota, due to the large amount of unplanted crop acres in early June.

The biggest surprise in the June 30th USDA Acreage Report was the estimated 88.3 million acres of soybean acres that will be planted in 2022 across the U.S., which was a decline of 2.6 million acres from the March 1 USDA acreage estimate. The 2022 U.S. soybean acreage projection does represent an increase of just over 1% or 1.1 million acres from the 2021 planted acres.

The estimated 2022 U.S. soybean acreage compares to 87.2 million acres in 2021, 83.1 million acres in 2020, 76.1 million acres in 2019 and 89.2 million acres in 2018. The record for U.S. soybean acreage was 90.2 million acres in 2017. The USDA projection was below the average pre-report grain trade estimate by over 2 million acres and was lower than even the lowest projection by grain marketing experts.

The June 30th USDA report estimated that 89.9 million acres of corn were planted in the U.S. in 2022. This was an increase of 431,000 planted acres from the March USDA Planting Intentions Report but represented a decrease of about 4% from the 2021 planted acres.

The estimated 2022 corn acreage compares to 93.4 million acres in 2021, 90.8 million acres in 2020, 89.7 million acres in 2019, 88.9 million acres in 2018 and 90.2 million acres in 2017. The highest corn acreage totals in recent years were 97.3 million acres in 2012, 95.4 million acres in 2013 and 94 million acres in 2012.

The USDA estimate for 2022 U.S. corn acreage was slightly higher than the pre-report average grain trade estimates, which resulted in a significant price decline for corn futures prices on the Chicago Board of Trade (CBOT) on June 30.

Based on the June 30th report, 2022 corn acreage is expected to decrease as compared to 2021 corn acreage in most of the major U.S. corn production states. The biggest expected percentage decrease in 2022 corn acreage from last year in the upper Midwest was a decrease of 27% in North Dakota, which has an estimated 3 million corn acres. 

The 2022 corn acreage totals in other Midwestern states compared to 2021 corn acreage were: Iowa at 12.7 million acres, down 2%; Illinois at 10.7 million acres, down 3%; Nebraska at 9.7 million acres down 2%; Minnesota at 8.5 million acres, down 1%; South Dakota at 5.9 million acres, down 4%; Indiana at 5.1 million acres, down 6%; and Wisconsin projected at 4 million acres, unchanged.

The 2022 soybean acreage is expected to increase or remain steady as compared to 2021 acreage levels in all major soybean producing states in the Midwest except Minnesota and North Dakota. Illinois is projected to have the largest 2022 soybean acreage at 11.2 million acres, which is up 6% from 2021. 

Other state soybean acreage totals compared to 2021 soybean acreage include: Iowa at 10.3 million acres, up 2%; Minnesota at 7.5 million acres, down 2%; North Dakota at 5.9 million acres, down 19%; Indiana at 5.7 million acres, up 4%; Nebraska at 5.6 million acres, unchanged; South Dakota at 5.5 million acres, up 1%; and Wisconsin at 2.2 million acres, up 7%.

The biggest increases in the estimated 2022 soybean acreage compared to 2021 acres are increases in Tennessee up 16%, Mississippi and Virginia up 13% and Kentucky up 11%, accounting for just over 4.5 million total soybean acres in the four states.

The June 30th USDA report pegged total 2022 U.S. wheat acreage at 47.1 million acres, which includes 11.1 million acres of spring wheat. The projected 2022 wheat acres would be an increase of 1% or 400,000 acres over the 2021 total; however, this would still be the fifth lowest total U.S. wheat acreage since USDA began tracking crop acreage in 1919. 

Kansas is projected to have the highest 2022 wheat acreage at 7.4 million acres, followed by North Dakota at 6.5 million acres, Montana at 5.6 million acres, Texas at 5.4 million acres, and Oklahoma at 4.4 million acres. Minnesota is projected to have 1.25 million wheat acres in 2022, an increase of 3% from the 2021, with South Dakota at 1.6 million acres in 2022, an increase of 5% from 2021.

June 30 quarterly grain stocks summary

The USDA Quarterly Grain Socks Report released on June 30th indicated a total U.S. corn inventory of just over 4.35 billion bushels on June 1, 2022, which represented an increase of about 6% from the corn inventory of near 4.1 billion bushels a year ago. Approximately 49%, or 2.12 billion bushels, of the total U.S. corn inventory was in on-farm storage on June 1, which compares to 1.74 billion bushels a year ago.

On-farm corn inventories on June 1 included 375 million bushels in Iowa, 325 million bushels in Minnesota, 245 million bushels in Nebraska, 270 million bushels in Illinois and 130 million bushels in South Dakota, all of which are considerably higher than comparable on-farm inventories a year ago.

The Grain Stocks Report showed a total U.S. soybean inventory of 971 million bushels, up 26% or 202 million bushels from June 1, 2021. The soybean stocks estimate exceeded the average pre-report estimate from grain traders and caused a negative reaction in CBOT soybean futures prices.

The soybeans stored on farms, as of June 1, 2022, were estimated at 331 million bushels, which compares to just under 220 million bushels a year ago. The on-farm soybean inventories on June 1, 2022, included 70 million bushels in Iowa, 50 million bushels in Minnesota and Illinois, 23 million bushels in Indiana, 22 million bushels in Nebraska and 19.5 million bushels in South Dakota. The USDA estimated levels of on-farm soybean stocks on June 1st in nearly every major soybean producing state are 50% or more above levels a year ago.

Grain price impacts

Chicago Board of Trade (CBOT) futures prices for both corn and soybeans decreased substantially following the release of the USDA Crop Acreage and Quarterly Grain Stocks Reports on June 30. Both nearby and “new crop” CBOT corn futures decreased by approximately $.35 per bushel following the release of the USDA Reports, while CBOT soybean futures had declined by close to 50 cents per bushel by July 1.

July CBOT corn futures were trading at $6.21 per bushel in mid-morning on July 1, while December futures were trading at $6.08 per bushel. This compares to $5.99 per bushel for July futures and $5.88 for December corn futures on June 30, 2021. July CBOT soybean futures were trading at $15.13 per bushel on July 1, with November soybean futures at $13.77 per bushel, which compares to $14.30 per bushel for July futures and $13.99 for November futures a year ago.

The fact that the CBOT corn and soybean futures prices on July 1 this year are fairly close to prices a year ago would probably surprise many farm operators, given that nearby CBOT corn futures prices were at $7.00 to $8.00 per bushel and nearby CBOT soybean futures were at $16.00 to $17.00 from early March until recently.

If the USDA grain stocks estimates are accurate, it may be difficult to see a rebound in the nearby CBOT corn and soybean prices, unless there are weather issues with the 2022 corn and soybean crop. Many locations in the Upper Midwest continue to have a “positive basis” for corn and soybeans at ethanol and processing plants, meaning that the local cash corn and soybean price is higher than the corresponding nearby CBOT futures price. This is providing some good opportunities to market any remaining unpriced 2021 corn or soybeans that are still in storage. Some producers have also taken the opportunity of favorable prices to forward price some of the expected 2022 corn and soybean production.

We are likely to see continued volatility in grain prices in the coming weeks, especially if drought concerns increase in some portions of the Midwest.

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.