Crops > Outlook & Prices > Outlook & Prices
June 2022
Strength in international sales
With the vast majority of the spring crops now planted, the markets are turning their focus to the weekly crop development and conditions for supply news and the weekly export sales reports for demand news. USDA’s Crop Progress report summarize observer ratings on the condition of the crops once they emerge from the soil. The condition reports started in early June for corn and mid-June for soybeans. Every Monday morning, roughly 3,600 cropping experts across the nation rate the crops in their region on a "very poor" to "excellent" scale. The early ratings show that while there may be concerns about the timeliness of the crops, the condition of the crops is very good. Seventy-three percent of the nation’s corn crop was rated "good" to "excellent" with the first rating, which was one point higher than the initial rating of the 2021 crop. The next week, the "good" to "excellent" percentage shifted to 72%, 4 points higher than 2021. For soybeans, the initial "good" to "excellent" rating stands at 70%, 8 points higher than 2021. In general, the crops are looking good across the nation, despite the planting delays and the drought in the West.
While there is not a lot of data to pore through yet on the supply side, the weekly export sales reports provide more information on the early signals for international sales and shipments. For example, the export reports are currently tracking sales agreements for the 2021, 2022, and 2023 corn and soybean crops. So we can see the international interest in our crops up to two years before harvest. With the higher prices corn and soybeans are capturing over the past 18 months, there has been some concern that international sales would fall off. Looking back at historical price surges, it is the export line that tends to shrink the most quickly. But the data thus far highlight that we aren’t seeing any significant export issues currently. Figures 1 and 2 display the advance export sales patterns for soybeans and corn over the past few years. The graphs contain the data for the 2020 and 2021 crops, along with the sales thus far for the 2022 crop and the 5-year average (2017-2021) pattern for export sales. The lines for each year basically start at the beginning of the calendar year the crop was planted and harvested, so the sales represented are being made either before the crop is planted or during the growing season.
As Figure 1 shows, soybean prices are being supported by very strong export demand at the moment. Even with the near doubling of prices over the past two years, the quantity of soybeans being purchased internationally has continued to rise. Advance sales for the 2022 crop jumped ahead the 5-year average in early January and have continued to build a positive gap over the 5-year average ever since. The current run of advance sales passed the 2021 pace in early February and, again, has extended the lead since then. Currently, nearly 500 million bushels of soybeans are already spoken for as exports out of the 2022 crop. Usually, we hit that level sometime in August, just before harvest. As the figure shows, the pace of advance soybean export sales tends to increase over the coming months, providing some underlying support for the soybean market over the next few months.
The data for corn are not nearly as supportive, but the export sales pace is still above average. For the last two years, any large adjustments in the flow of corn advance sales have come about as China repositions itself in the global feed complex. China has become a major corn destination since 2020 and when China moves in the corn market, it is noticeable. For example, in 2020, China made two early sets of corn purchases, one in mid-July and the other in mid-August. But the largest spike in advance corn sales came in 2021, when over the course of a three-week span in May, China led a flurry of advance corn purchases, adding 500 million bushels to the export sales total. The advance sales for this year had been running ahead of the average and 2021 pace until May. Now, the sales pace is well below last year’s, but still slightly above the 5-year average. While China is currently the top purchaser in those advance sales (roughly half of the total), they haven’t made the large purchases as they did for the last two years. As was the case with soybeans, the trend moving forward is for an increasing pace of sales as harvest approaches.
A portion of the export strength is being driven by the concerns around and impacts from the Russian-Ukrainian war. The conflict is limiting the flow of crops from storage in the Black Sea region, hampering harvest of fall-seeded crops (mainly winter wheat), and severely restricting planting efforts for spring-seeded crops. Thus, the war has created significant concerns about global crop supplies. That uncertainty has translated into significantly higher crop prices, along with increasing price volatility. Figure 3 displays the relative price moves for November and December futures on corn, soybeans, and wheat. Here, all of the crop prices are indexed to a value of 1 at the beginning of the year. The Chicago and Kansas City futures trace winter wheat pricing, while the Minneapolis futures outline spring wheat pricing. As the figure shows, all of the crops were seeing steady to rising prices during the first couple of months in 2022. But the price increases, and price volatility, really took off with the start of the war. Rumors about the ability of Ukrainian farmers to work, whether caring for and harvesting wheat or planting corn, or the flow of potential exports, as the United Nations has met with Russia and Ukraine to try to find an agreement that would allow crop supplies to be marketed, have flung the markets in both directions.
Currently, wheat prices are 35-50% higher than at the beginning of the year. Corn prices have risen 30%, while soybean prices have increased by 22%. And while most crop prices are no longer at their peak (with the possible exception of soybeans), the advance export pace has set a foundation for maintaining relatively stronger than usual prices throughout the rest of the year. USDA’s full projections for the 2022 crops have soybean exports exceeding 2021 levels, with corn exports falling only 50 million bushels of 2021 levels. USDA is expecting international demand to remain robust over the course of the next 12-15 months, despite the heightened pricing.
Listen to the June 2022 Crop Market Outlook video for further insight on outlook for this month.
Chad E. Hart, extension economist, 515-294-9911, chart@iastate.edu
