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The 2022 crop year in review
As is customary in January, USDA provides the final production numbers for the previous year and updates usage estimates based on the data from the first quarter of the marketing year. This year’s review showed a larger production impact from the drought, in comparison to the past couple of years, but the corn and soybean crops were still large relative to historical crops. Crop usage has declined to somewhat match the smaller crop supplies, with exports bearing the brunt of most of the decline. The price estimates for the 2022 crops remain quite strong, holding well above last year’s prices. So while crop production was more challenging this year, crop prices eased some of the financial burdens.
After a third year of drought across most of the western United States, corn yields across the nation have held up surprisingly well. While the national yield did decline by 3.4 bushels per acre, it is still above 170 bushels per acre, coming in at 173.3 bushels per acre. Mainly, it was the states in the northern parts of the country that captured better corn yields this past year, as drought conditions lessened there. However, the drought intensified in the Central and Southern Plains, lowering corn yields from Nebraska to Texas. The Southeast also saw a sizable decline in corn yields. Iowa’s corn yield moved along with the national average, with a roughly two percent fall, being estimated at 200 bushels per acre. Record corn yields were estimated for Minnesota, Wisconsin, and Illinois.
The pattern for soybean yields was somewhat similar, but the decline in yield was more widespread. Only two of the states where USDA estimates state-level soybean yields saw increases, North Dakota and Minnesota. Two other states tied their record yields from last year, Arkansas and Mississippi. All other reported states experienced declines. For Iowa, the state average soybean yield fell 4.5 bushels to 58.5 bushels per acre.
For the 2020 marketing year, corn usage exceeded production, leading to increasing prices. For 2021, production jumped by roughly a billion bushels, while usage only grew by 135 million bushels. However, corn prices continued to improve. For 2022, both production and usage dropped significantly, but as with 2020, corn usage exceeded production and prices continued to rise. Within the most recent estimates for the 2022 crop, production, usage, and stocks declined. USDA found that farmers harvested fewer corn acres than previously projected, lowering harvested acreage by 1.6 million acres. As the yields from these acres were poor, the national yield estimate actually increased by a bushel. But the end result was a 200 million bushel decline in the corn production estimate, bringing the 2022 national total well below 14 billion bushels. And as is usually the case, when the production estimate declines, so do usage estimates. USDA pulled 25 million bushels from feed and residual usage, 10 million bushels from food, seed, and other industrial uses, and 150 million bushels from exports. 2022-23 ending stock estimates dropped by 15 million bushels, to 1.242 billion bushels, reflecting a further tightening of the corn market as those stocks would be 135 million bushels below the previous year. Despite the tighter stocks, USDA held with its previous estimate for the season-average price at $6.70 per bushel.
The soybean data again tells a similar story to corn. For the 2020 marketing year, usage exceeded production and prices rose. For 2021, production grew, usage slipped, but prices remained robust. And 2022 returned to the pattern of 2020. Like with corn, harvested area fell, by 300,000 acres. However, unlike corn, the national soybean yield estimate also fell, by 0.3 bushels per acre, to 49.5 bushels per acre. The combination brought the production estimate down by roughly 70 million bushels, lowering national production below 4.3 billion. Soybean usage estimates were lowered by 4 million bushels for seed and residual use and 55 million bushels for exports. So 2022-23 ending stocks declined by 10 million bushels, to an estimate of 210 million bushels, which is roughly 65 million bushels less than the 2021-22 ending stock number. Based on that and the continuing strength in soybean prices, USDA increased its 2022-23 season-average price estimate by 20 cents to $14.20 per bushel.
In the grand scheme of things, the January USDA reports brought the markets some short-term positive news for prices. But they also brought some longer-term concern for pricing deeper into 2023. The smaller crops are a sign that supplies will remain tight until the next harvest. And while usage has pulled back, production declined even more. So nearby futures prices rose with the release of the reports. However, the cuts in usage, especially exports, are reaching significant levels. Corn exports are now projected be 822 million bushels less than what we captured for the 2020 crop. Soybean exports are set to be 276 million bushels less than 2020. And domestic usage has some holes in it as well, with corn feed and residual usage down 332 million bushels from 2020. If crop production rebounds in 2023, as USDA’s long-term projections show, then the markets will need a strong rebound in these usage categories. Given the continuing decline in the size of the cattle herd and the concerns about the global economy, that usage rebound looks hard to come by.
Based on that, the pricing outlook for 2023 is mixed. Old crop prices should remain strong and roughly follow the seasonal pattern throughout the spring and summer, given the limited supplies. New crop prices face more challenges to hold current levels. We can expect some downside volatility in March with the release of planting intentions and the weather/drought conditions will influence futures prices throughout the summer. But the biggest challenge will be in the fall, as the harvest rolls in and we see if usage can match up with where the production number concludes.
View the January 2023 Crop Market Outlook video, for further insight on outlook for this month.
Chad E. Hart, extension economist, 515-294-9911, email@example.com