The USDA gave its first forecast of 2022 crop acreage at the Feb. 24-25 virtual Agricultural Outlook Forum, projecting planted corn acreage at 92 million acres, down from 93.4 million last year; soybeans at 88 million acres, up from 87.2 million last year; and wheat at 48 million acres, up from 46.7 million last year.
The estimates were almost immediately called into question by analysts, however, who speculated that the Russia-Ukraine conflict will likely shift the balance back to corn by the time USDA’s Prospective Plantings report comes out in late March. This is in spite of earlier expectations that surging fertilizer prices would lead farmers to reduce corn acreage this year.
While noting that the combined acreage estimate for corn, soybeans, and wheat is up slightly from last year and the highest total since 2014, USDA said “shifts in relative prices and higher input costs support a year-to-year decrease in expected corn plantings, although the decline is moderated by the highest projected corn price for crop insurance purposes in over a decade.”
USDA said strong U.S. crush demand, the current drought in South America, and a focus on managing high production costs will benefit soybean plantings this year, while strong wheat prices and the tightest stocks-to-use ration since 2014 will likely boost wheat acreage. “With higher supplies, prices for all three commodities are expected to decline from last year,” USDA said.
Corn and wheat prices pushed higher in response to the war in Ukraine, however, fueled by port closures in Ukraine and economic sanctions against Russia. Ukraine accounts for 10-15 percent of the world’s corn exports, and Russia and Ukraine combined account for 25-30 percent of total world wheat exports. As of March 3, corn futures in Chicago were trading at the highest since 2012, and outperforming soybeans this year.
Analytics firm Gro Intelligence told Bloomberg that it expects planted corn acreage in the U.S. to jump to 95 million acres as a result, with soybean acreage declining, according to the group’s AI-driven modeling. Cotton plantings are also expected to increase this year. Gro uses a wide range of data to come up with its estimates, Bloomberg reported, and unlike the USDA, it does not survey farmers.
Bloomberg also reported this week that China is scooping up U.S. corn and soybeans as part of efforts to mitigate the risks to commodity supplies from Russia’s war in Ukraine and slower harvests in South America. China is a major buyer of corn and barley from Ukraine, as well as sunflower oil from both Ukraine and Russia.
Chinese buyers recently booked about 20 cargoes of American soybeans and about 10 shipments of corn, according to traders cited by Bloomberg who asked not to be identified as they aren’t authorized to speak publicly.
The U.S. soy purchases are for shipment from May onward, the traders said, which is unusual as Brazilian soybeans are historically cheaper than American at that time of year, immediately after Brazil’s harvest takes place in February and March. Brazil’s weather woes have delayed the harvest and impacted exports, however, and also diminished hopes for a big crop.
This lack of immediate supply is seen on huge ship lineups outside ports in Brazil as well in premiums for the crop, Bloomberg reported. Brazilian soybean future contracts from Santos are higher than those from the U.S. Gulf this year, which Bloomberg said is a sign that supplies from the world’s biggest producer and exporter are smaller and more demand should go to the U.S.
For corn, China is seeking to replace some supplies from Ukraine and also as a buffer against future production losses, the traders said. Ukrainian corn is usually planted in April and May, and the ravages of war, a shortage of farm workers, and chaos around transportation and logistics may put those crops in jeopardy.
Brazil, usually the third or fourth biggest corn exporter, is struggling to replenish depleted stocks after a smaller-than-expected crop harvest last year. USDA has lowered Brazil’s corn crop estimate to 114 million tons from its initial 118 million estimate, Bloomberg reported.
Rice is also getting swept up in the turmoil of Russia’s invasion of Ukraine. Bloomberg reported that prices for rice are surging because traders are betting it will be an alternative for wheat, which is becoming prohibitively expensive. Rice jumped as much as 4.2 percent, to $16.89 per 100 pounds, the highest since May 2020, and is on track for an 11 percent weekly gain, the most since 2018.
At its Agricultural Outlook Forum, USDA projected total 2022 planted rice acreage at 2.6 million acres, up almost three percent from last year.
“Everyone’s trying to buy every type of starch they can,” Arlan Suderman, Chief Commodities Economist at StoneX, told Bloomberg. “With wheat supplies tightening up dramatically on the world market, you’re going to see demand shifting to rice to fill that need to feed people.”