Crops > Outlook & Prices > Outlook & Prices
February 2023
Global supplies and export challenges
While the US corn and soybean crops were smaller this past year, that was not true for some of our major competitors across international agriculture. Despite drought challenges in South America and the war in the Black Sea region, global crop production was mixed. Corn production fell, wheat production held steady with last year, and soybean production set another record. The combination of tighter US supplies, strong US prices, and expansion by some of our export competitors has put a dent in the export outlook for the 2022 and 2023 crops.
Currently, a lot of the market chatter is focused on the weather conditions in South America and the impact on South American production. Tables 1 and 2 show the latest global estimates from USDA and the major adjustments were in South American crops. For corn, the general picture is for reduced global production, with drought conditions in Argentina sharply reducing corn potential. The latest update shaved 200 million bushels off of Argentina’s corn supply. However, increased corn acreage in Brazil is leading to a sizable jump in Brazilian corn production. Brazil’s corn crop is projected to be 350 million bushels larger this year.
The global soybean situation is different. Global production is higher, despite the fall in US production. The drought in Argentina forced USDA to downgrade soybean production potential by 160 million bushels. But as with corn, the Argentine decline is being more than made up for by the increase from Brazil. In fact, the growth from Brazil is enough to cover both the Argentinian and US declines. Brazil is projected to harvest over 5.5 billion bushels of soybeans. Add on the growth in soybean production in Paraguay and South America has plenty of soybeans for the global market.
The export markets have been strong supporting pillars for corn and soybean prices. Figures 1 and 2 show the export sales pace currently and compare it across the past few years. In both graphs, the blue line (square) shows the sales pattern for the 2020 crop, when both corn and soybeans set records for the number of bushels exported. The green line (triangle) shows the pattern for the 2021 crop, when fewer bushels moved out of the country, but prices rose more than enough to offset the bushel decline, leading records in terms of export value. The red line (diamond) shows the sales for the 2022 crop thus far and the black line (solid) displays the five-year average pattern for export sales.
For soybeans, the strength in export sales has originated from a variety of sources. For the 2020 marketing year, it was driven by the surge in sales to China following the Phase 1 trade agreement. Those sales in the fall and early winter of 2020 set the stage for the record international shipments. For the 2021 marketing year, export sales for the first half of the marketing year were hovering around the five-year average until the Russian-Ukrainian war broke out. Concerns about global vegetable oil supplies (as Ukraine is a vital producer of sunflower oil) spurred on some late season soybean purchases during March and April of 2022. Mexico, the European Union, and Egypt substantially increased their soybean purchases from the US during that time. Thus far, for the 2022 crop, the export sales pace has been similar to the 2021 crop, hovering just above average. The concern is that USDA’s current outlook shows that those similarities will end, as export sales are expected to fall below last year’s pace and the five-year average over the remaining months of the marketing year. The gains from Mexico, the European Union, and Egypt have been lost this year thus far. And while Chinese purchases have increased, it is not enough to maintain the record export pace of the past couple of years.
For corn, the storyline for the 2020 export sales was the same as for soybeans, Chinese purchases surged exported bushels to record levels. The 2021 marketing year saw that strong export pace remain fairly consistent throughout the year. Our North American trade partners, Canada and Mexico, provided a great deal of support during the last crop year. Both countries increased their corn purchases significantly, as drought impacts affected their feed grain production. But US corn export sales fell off at the start of the 2022 marketing year and haven’t recovered. The drop in sales put us not only behind the pace of the past few years, but also well behind the five-year average. And USDA’s current outlook suggests that corn sales will continue to lag, with 1.925 billion bushels exported, which is roughly 300 million bushels below the five-year average. The reduction in corn sales has been broad based as countries in Latin America, eastern Asia, and Africa has limited purchases, but the largest reduction has been from China. Thus far, China has purchased 300 million fewer bushels of US corn.
For 2022-23 season-average prices, USDA held firm with corn at $6.70 per bushel, but raised soybeans to $14.30 per bushel, a 10 cent increase. The weakening of export potential hasn’t put a damper on old crop pricing. But new crop pricing is showing some strain from the possibility of more moisture for the US and South America for the next set of crops and the concern that export markets may not rebound as robustly as crop supplies. Currently, futures point to the 2023-24 season-average prices being in the $5.80 range for corn and the $13.40 range for soybeans. Both crops are facing 90 cent reductions in price. But these reductions in price will get larger if exports continue to fall short.
View the latest Crop Market Outlook video for further insight on market outlook.
Chad E. Hart, extension economist, 515-294-9911, chart@iastate.edu
