Crops > Outlook & Prices > Outlook & Prices
August 2022
Mixed messages
Each month during the growing season, the US Department of Agriculture provides market watchers an update on their projections for the coming marketing year. The August update is important as it is the first monthly update where farmers weigh in on potential production, via a national survey. This year, the August update was also special as it included a re-survey of crop plantings in the states most delayed this spring (Minnesota, North Dakota, and South Dakota).
For corn, USDA’s update showed that both corn supply and usage are shrinking, but supply was moving a bit faster than usage. The planting re-survey found a few of the acres intended for corn were not planting this spring. Thus, corn harvested area was adjusted down slightly to 81.8 million acres, which is 3.6 million less than last year. The results of the farmer survey also revealed yield prospects are lower as well. The national yield was estimated at 175.4 bushels per acre, 1.6 bushels below the July estimate and last year’s crop yield. Farmers indicated better yield potential in the NW Corn Belt, but much weaker potential in the Southern Plains (drought) and Southeast (flooding). Iowa’s projected corn yield is 205 bushels per acre, the same as last year. National corn production was lowered by 146 million bushels, setting total production at 14.36 billion bushels. That would be 756 million fewer bushels than last year, so corn supplies are significantly less. However, corn usage is also retreating. While ethanol production has rebounded from the COVID cut, corn use for ethanol is not quite as strong as USDA previously estimated, which forced USDA to cut 25 million bushels from the ethanol estimate for the 2021 crop. Meanwhile, looking forward, USDA expects the liquidation of cattle in the West due to the drought will lower corn feed use this fall and winter, falling by 275 million bushels. Export quantities for corn are also expected to decline, by 75 million bushels, as higher prices, inflationary concerns, and general economic woes are not just a US problem, but a global one. The one corn usage area seeing an increase is corn sweeteners, up 5 million bushels for both the 2021 and 2022 crop years. In the end, the 2021-22 corn ending stocks estimate increased to 1.53 billion bushels, while the 2022-23 ending stocks projection declined to 1.388 billion bushels.
Figure 1 displays the state corn yield estimates. While drought and flooding are having major impacts, there are still four states showing potential for record yields (including Iowa, tying last year). This map also shows how the drought has shifted. Drought conditions have dominated the western US for the past couple of years. In 2020 and here in 2022, more of the impact on corn production was seen in the Central and Southern Plains. In 2021, that impact was centered in the Northern Plains. Thus, the map shows sizable gains in corn yields in the Northern Plains and losses in the South.
The Southeast had nearly ideal corn growing conditions last year, which is not the case this year.
Switching to soybeans, traders had anticipated slightly higher acreage and slightly lower yields with the August USDA update. Instead, we got the opposite. Soybean plantings were lowered by 300,000 acres and the national yield was raised 0.4 bushels. Farmers indicated stripes of alternating yield prospects, with the Northern Plains looking better than last year, Nebraska, Iowa, Wisconsin, and Michigan looking worse, and so on. Overall, the record projected yields in Illinois, Indiana, Ohio, Arkansas, Mississippi, and Virginia carried the day, as the national yield estimate is set at a record 51.9 bushels per acre. Given the combination of more soybean acres than last year and a higher projected yield, national soybean production is estimated at 4.53 billion bushels, 96 million bushels better than last year, so the market has more soybeans to work with. As USDA examined soybean usage, the major adjustment they made was a partial transfer of exports from the 2021 crop to the 2022 crop, with a 10 million bushel drop in 2021 exports and a 20 million bushel increase in 2022 exports. Overall, soybean usage is projected to increase, but not as fast as production. Thus, the adjustments increased ending stocks estimates for old and new crop soybeans.
Looking forward, USDA will continue to update their weekly crop ratings and in September, they will begin the objective yield surveys, where they actually go out into fields, counting plants, ears, and pods. These pieces of information will provide a much richer picture of potential production. On the corn crop ratings, this year’s crop has now fallen below both the average and last year. Typically, between now and harvest, the percentage of the crop rated Good to Excellent will dwindle by an additional 3%. That would provide additional support for USDA to adjust corn yields again.
The national soybean ratings have followed much closer to the 5-year average, but this year’s rating has moved slightly below last year. While the August farmer survey revealed the potential for higher yields, the crop ratings suggest lower yields, in the 50 bushel per acre range. Between now and harvest, the Good to Excellent percentage typically falls another 2%.
Given all of the changes in the USDA projections, they maintained their corn season-average prices where they were, $5.95 for the 2021 crop and $6.65 for the 2022 crop. For soybeans, USDA lowered its season-average price estimates by 5 cents for each year, down to $13.30 for the 2021 crop and $14.35 for the 2022 crop. Futures market-based projections of those same prices reveal that the markets are more pessimistic than USDA, with estimated prices in the $6.25 range for corn and $14.25 range for soybeans. The slightly lower market prices are mainly based on concerns about exports and the general economy. However, the markets are also rebuilding some of the weather premium in crop prices as the drought continues. Despite all of the price variation so far this year, 2022 should be another profitable year for farmers. Throughout all of the swings up and down this year, market prices have remained well above production cost estimates. And drought concerns should keep prices higher over the next couple of months.
For more ag market outlook, see this month’s video.
Chad E. Hart, extension economist, 515-294-9911, chart@iastate.edu
