October 2021

Big projected crops tend to get bigger

A lot of data comes flying at the crop markets through the months of September and October. We get weekly updates on crop conditions and harvest progress. We see the first two sets of data from USDA’s objective yield surveys, examining the crops out in the field. The Grain Stocks report reveals the ending stocks from the previous year’s crops, adding to the harvest totals. And we observe the first few weeks of export sales. That data, so far this year, has shown the crop markets will have plenty of product to work with over the coming months, but usage may not be as strong as it has been over the previous 12 months. Those storylines have forced crop prices to retreat somewhat as the harvests roll in, but that is the typical seasonal pattern as well. And while prices have retreated, current cash prices remain at profitable levels.

The outlook for corn suggests record production this fall, a slight decline in usage and building stocks going into harvest next year. Despite the drought, US corn production is set to break through the 15 billion bushel level for the first time. The October estimate for the national average corn yield is only one-tenth of a bushel below the record from 2017. The common refrain I’m hearing from many farmers is the crops are “better than I expected”. While the year has presented many challenges, the yield monitor is boosting a lot of spirits. The 2020 ending stocks were a bit higher than anticipated, but total corn supplies will stay below the levels we saw in 2017 and 2018 (which had smaller crops, but larger stocks). So, as has been the case for the past several years, the corn market will have lots of kernels to feed and fuel users.

The price recovery over the past 14 months was driven by a surge in international demand. The combination of impacts from the early days of COVID, the full hit of African Swine Fever in China, and trade disputes with several countries had taken its toll on US international corn sales during the 2018 and 2019 marketing years. Exports fell from a record 2.4 billion bushels in 2017 to just below 1.8 billion bushels in 2019. During the 2020 marketing year, the COVID restrictions were lifted, China has begun rebuilding its hog herd, and trade policy stabilized. Corn exports rocketed to record levels, pulling 2.75 billion bushels from the market. The billion bushel boost in exports provided the support for the 2020 national season-average price to jump by nearly a dollar per bushel and set the stage for continued price strength for the current marketing year. However, the higher prices and increasing competition internationally, have eroded some of that record international demand. Looking forward, USDA currently projects a slight increase in feed and residual use, continuing recovery in ethanol production (but still short of pre-COVID levels), steady food, seed, and other industry use, and a 250 million decline in exports. Add it all together and corn usage is projected to decline by roughly 40 million bushels. That’s not much, but given a record corn crop coming in, it’s enough to allow prices to slide from earlier highs.

Current corn futures point to a 2021 season-average price in the $5 range. USDA, however, has projected a $5.45 average price, figuring in that many farmers took advantage of higher prices this spring and summer for pre-harvest sales. And while futures prices have backtracked over the past few months, corn futures remain above $5 per bushel all the way until harvest of 2023. The price strength in the face of record production indicates traders are expecting corn usage to hold as USDA projects, not only for this marketing year, but the next as well. The strong price outlook for 2022 will be needed as input costs have also risen significantly.

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The soybean market has very similar dynamics to the corn market. It was a rebound in exports that spurred the price run over the past 14 months. USDA projects a record crop, but a slight decline in usage for the current marketing year. But current futures are holding at good levels for producers for the 2021 and 2022 marketing year.

China returned to its dominant position in the soybean market under the provisions of the Phase 1 trade deal. Soybean sales to China increased dramatically and total soybean exports reached a new record of 2.265 billion bushels for 2020.

The jump in exports brought total soybean usage over 4.5 billion bushels and cut ending stocks by over 50%. The 2020 season-average price rose to $10.80 per bushel, topping the average prices for 2018 and 2019 by over $2 per bushel. The higher prices incentivized farmers to plant more soybeans in 2021, but acreage still trails the recent highs from 2017 and 2018. The drought seems to have had little national impact, as the national yield estimate is only 0.4 bushels under the record from 2016 and the national production estimate is a record 4.448 billion bushels. So just as with corn, the soybean market has plenty of beans to go around.

The 2021 usage projections show steady to growing domestic usage, but declining international usage, again very similar to corn. Much of the growth in soybean crush is associated with expected growth in soybean oil usage in biofuels, especially renewable diesel. But, at least for this year, that growth is projected to be outpaced by the contraction of exports. Despite the drop in usage, USDA currently forecasts a 2021 season-average price of $12.35 per bushel, up roughly $1.50 from last year. The pre-harvest marketing some farmers did this spring and summer will aid in getting there. Current futures project that season-average price should be just below $12. But the futures are showing longer-term strength as well, with current futures prices holding above $11.80 until September of 2023.


Chad E. Hart, extension economist, 515-294-9911, chart@iastate.edu


Chad E. Hart

extension economist
Iowa State University
468E Heady Hall
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