Crops > Outlook & Prices > Outlook & Prices
May 2022
Early adjustments
The May World Ag Supply and Demand Estimates (WASDE) report always provides the first major update for the corn and soybean crops once planting begins, as the data for the new crop year is not added to the tables until May. This year, there are several factors greatly influencing the potential supply and demand for the crops, which have made USDA’s job more challenging and heightened the trade’s interest in the early numbers. Typically, with the May report, USDA sticks with the acreage estimates from the March Prospective Plantings report and the trend yield released at the Ag Outlook Forum in February. Thus, the May report is mostly about the usage projection changes since the Ag Outlook Forum, as the supply adjustments are well telegraphed. However, this year is not a typical year.
The first major shift was a downgrade in the national projected corn yield due to the delayed planting thus far. At the Ag Outlook Forum in February, USDA announced a weather-adjusted trend yield of 181 bushels per acre for corn. In the May WASDE, that yield slipped to 177 bushels per acre. The four bushel drop is based on the significant delays seen in planting across the nation, mainly being driven by wet conditions in the Corn Belt and Northern Plains, despite the continuing drought in the West. As of May 8, 22% of the US corn crop was planted. That is 28% behind the five-year average (typically by May 8, half of the corn crop is planted) and 42% behind last year. Since 1980, only four years recorded slower planting progress, 1983, 1984, 1993, and 2013. In all four of those years, the final national yield fell below trend. Given this data and the potential for more precipitation throughout the rest of the month, USDA made the early adjustment to corn yields. This change in yield takes roughly 325 million bushels off of expected production.
While corn did see additional supply adjustments, soybeans held to the normal pattern with the yield remaining at the Ag Outlook Forum number of 51.5 bushels per acre. Soybean planting has also been delayed by the soggy conditions, but the gap is less pronounced. As of May 8, 12% of the US soybean crop has been planted. That is 12% behind the five-year average and 19% behind last year. The five “most similar” years in terms of planting progress up to this point are: 2002, 2003, 2007, 2009, and 2014. The national yield was below trend in three of those years and above in the other two, providing USDA some support to stay with their trend yield.
The second major update impacted the global balance as USDA updated its global production numbers, including those for Ukraine. Despite the war in the country, Ukrainian farmers are forging ahead with spring planting. The war and occupation are impacting some major production areas, but official Ukrainian reports and satellite imagery shows significant movement in crop fields. Figure 3 displays USDA’s updated projections for three of Ukraine’s major crops: sunflower, wheat, and corn. The vast majority of Ukraine’s wheat crop was planted last fall, so the reduction is due to the combination of winter weather and the military advances across the fields. The sunflower and corn crops are being planted now, so the reductions reflect the loss of plantings due to the war. As the graphic shows, Ukrainian production will be down 35-55% this coming year, further tightening global supplies in these markets and supporting a continued reliance on US supplies for exports.
These data changes led to some significant shifts in the crop balance sheets. The corn projections in February pointed to an over 15 billion bushel corn crop. The May numbers come in with production just below 14.5 billion bushels (Table 1). The 780 million bushel decline in expected production has been offset by some sizable cuts in corn usage. Comparing the 2022 estimates to the 2021 estimates, feed and residual usage is down 275 million bushels and exports are off by 100 million, while ethanol usage is steady. Compared to the Ag Outlook Forum estimates, feed and residual usage is down 300 million bushels and ethanol is down 25 million, while exports are up 50 million. The war in Ukraine is creating a few more opportunities for exports, despite higher prices. The price run that started in the summer of 2020 continues to pressure USDA to raise its season-average price estimates. For the 2021 crop, the current season-average price estimate is $5.90 per bushel, up 45 cents over the past three months. But the sharpest price increase is for the 2022 crop. At the Ag Outlook Forum, the estimate was $5 per bushel. Now, it’s $6.75, with the futures market pointing even higher.
For soybeans (Table 2), the price outlook is similar, but the pathway there was vastly different. Exports from the 2021 crop continue to exceed expectations, leading to smaller ending stocks. While the 2021-22 season-average price estimate has not moved from $13.25 per bushel over the past few months, the price is $2.45 higher than the previous year. The acreage that moved away from corn in 2022 landed in soybeans. The shift added roughly 150 million bushels to projected production. But usage remains strong. Compared to 2021, domestic crush is up 40 million bushels and exports are up 60 million. Compared to the Ag Outlook Forum numbers, domestic crush is up 5 million and exports are up 50 million. The export growth is somewhat surprising given the jump in the season-average price estimate for 2022 to $14.40 per bushel, up $1.65 from February. However, the limited supplies of vegetable oils, especially sunflower oil from Ukraine, are supporting additional exports from the US.
The futures markets have been fairly bullish on the outlook for 2022, as futures-based season-average price estimates have been building over the course of the year. As of May 15, futures-based estimates were over $7 per bushel for corn and over $14.50 per bushel for soybeans. Producers are staring at some of the best prices they have ever seen for harvest delivery, which helps allay the pressures of higher input costs. Corn futures will be highly sensitive to supply concerns right now, with planting progress over the next couple of weeks being the key statistic, looking for the potential for additional cuts in yield. Soybean futures, on the other hand, will be more responsive to usage concerns. Over the past few years, the export swings in China have dominated the market. While the outlook is for growth, concerns about COVID shutdowns in China have created some volatility in the past few weeks.
Listen to the May 2022 Crop Market Outlook video for further insight on outlook for this month.
Chad E. Hart, extension economist, 515-294-9911, chart@iastate.edu
