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.”
