USDA’s Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports on Oct. 12 showed higher production and stocks for corn and soybeans, with analysts predicting a bearish outlook for crop prices amid soaring fertilizer costs. Sources in the field are sensing a significant acreage shift from corn to soybeans next year as a result.
Corn production was forecast at 15.0 billion bushels, up slightly from the previous forecast and up 6 percent from 2020. Based on conditions as of Oct. 1, yields are expected to average 176.5 bushels/acre, up 0.2 bushel from the previous forecast and up 5.1 bushels from last year.
Corn supplies are forecast up 72 million bushels from last month, on slightly higher production and increased beginning stocks based on the Sept. 30 Grain Stocks report. Projected feed and residual use was lowered 50 million bushels based on indicated disappearance during 2020/21. With supply rising and use falling, corn ending stocks for 2021/22 were raised 92 million bushels, while the season-average corn price was unchanged at $5.45 per bushel.
Bloomberg, citing ED&F Man Capital Markets Inc. analyst Charlie Sernatinger, suggested that December corn, fetching $5.24 a bushel currently, could fall below $5 per bushel based on the bearish outlook.
Soybean production was forecast at a record 4.45 billion bushels, up 2 percent from the previous forecast and up 5 percent from 2020. Soybean yields are expected to average 51.5 bushels/acre, up 0.9 bushel from the previous forecast and up 0.5 bushel from 2020.
Soybean supplies for 2021/22 are projected at 4.7 billion bushels, up 145 million on higher production and beginning stocks. With higher crush and unchanged exports, 2021/22 ending stocks are projected at 320 million bushels, up 135 million from last month. The U.S. season-average soybean price for 2021/22 is forecast at $12.35 per bushel, down 55 cents reflecting larger supplies.
The higher production and stocks estimates arrive as fertilizer prices continue climbing, driven by supply challenges and production outages in Europe due to high natural gas costs. The Green Markets North America Fertilizer Price Index hit a record $996.32/st on Oct. 8, up 7.9 percent on the year. Many analysts see the current pricing uptick continuing into 2022 as oil and natural gas prices are further buoyed by easing pandemic restrictions and a sustained global economic recovery.
With fertilizer costs accounting for 45 percent of the operating expenses for U.S. corn farmers, sources are telling Green Markets that a significant acreage shift from corn to soybeans is likely in 2022.
“The demand destruction is beginning,” said one Midwest contact this week. “My largest grower I spoke with today said he is planning on switching to 100 percent soybeans next year due to these input cost levels, has no interest in corn. You just cannot make them pencil out. It’s tough forecasting needs going forward. This business is not fun anymore.”
Not all were prepared to jump on the soybean bandwagon, however. “The acreage battle next year has turned sharply in corn’s favor,” countered Alexis Maxwell, Green Markets Director of Research. “After the report, the 2022 soy to corn ratio continued to fall and is at 2.33, a level that incentives more corn production next year. As recently as September, the ratio at 2.5 was a call for the opposite, more soybeans. Still, the ratio does not account for higher fertilizer costs, which will give many corn farmers pause as they pencil out next year’s budgets.”
Less-than-expected U.S. and global wheat supplies were one of the few bullish surprises in the WASDE report, and prices moved higher as a result. USDA lowered its estimate for wheat supplies by 10 million bushels, to 125 million bushels, due to lower production and reduced imports, while projected 2021/22 ending stocks were reduced 35 million bushels, to 580 million, which are the lowest U.S. ending stocks since 2007/08.
The projected 2021/22 season-average farm price for wheat was raised $0.10 per bushel to $6.70 per bushel, on reported National Agricultural Statistics Service (NASS) prices to date and price expectations for the remainder of 2021/22.