October 2022

Export concerns

The projections for the corn and soybean markets have shifted dramatically over the past couple of months. The September and October USDA reports outlined several adjustments, incorporating new acreage information from the Farm Service Agency and new survey data from NASS’s farmer and objective yield surveys. For both crops, USDA’s new estimates indicate less acreage and less yield. The national corn planted area estimate was decreased by 1.2 million acres to a total of 88.6 million acres. The national average corn yield estimate dropped to 171.9 bushels per acre. Putting together the acreage and yield updates, USDA found evidence to reduce projected corn production by over 500 million bushels, moving below 14 billion bushels for the year. That puts this year’s production over 1 billion bushels below the 2021 total, tightening corn supplies over the next 12 months. Similar supply changes were observed in the soybean market. Nationally, USDA reduced total planted area for soybeans by 600,000 acres, to 87.5 million acres. The national average soybean yield estimate came in at 49.8 bushels per acre, down 2.2 bushels over the past couple of months. Overall, the projection for national soybean production is 4.313 billion bushels, which is a large crop, but not quite as large as last year.

USDA also updated corn usage, with cuts impacting the major usage categories. The recent slowdown in ethanol production translated into a decline in corn grind out for the 2021 crop. However, corn export sales out of the 2021 crop were increased and feed usage was larger with the drought. Given the September Grain Stocks report, USDA set the 2021-22 corn ending stocks at 1.377 billion bushels, well below previous estimates. The reduction in stocks allowed USDA to increase its 2021-22 season-average price estimate to $6.00 per bushel. For the new (2022) crop, feed and residual usage estimates fell by 50 million bushels, exports declined by 225 million bushels, and corn usage for ethanol was slashed by 100 million bushels. Overall corn usage is projected to be down by over 800 million bushels for the new corn marketing year. The 2022-23 ending stocks are now set at 1.172 billion bushels, down 216 million bushels from August and down 205 million bushels from last year. The 2022-23 season-average price estimate rose to $6.80 per bushel.

Soybean usage adjustments reduced mainly international consumption. For the 2021 crop, USDA lowered exports, reflecting lower sales into China, along with reductions in seed and crush usage. Those changes boosted the 2021-22 ending stocks to 274 million bushels, so stocks rose, but the market remains tight. The 2021-22 season-average price estimate stayed at $13.30 per bushel. For the 2022 crop, the usage reductions spread and grew. The domestic crush expectation dropped by 10 million bushels. So while USDA still expects domestic usage to grow, they cut that estimated growth by 25%. The larger reduction shows up in exports, with 110 million bushels removed there, based on a combination of greater global supplies and more competition. Despite the losses in usage, 2022-23 ending stocks are projected at 200 million bushels, down 74 million from last year. However, the 2022-23 season-average price estimate slipped to $14.00 per bushel.

As the paragraphs above outline, the drought shrank the crops, but crop usage has retreated roughly as quickly. And the category with the largest sustained pullback for both crops is exports. For corn, USDA’s projection show 2.15 billion bushels exiting the country from the 2022 crop. That would be 321 million bushels below last year’s total and 597 million below 2020, an over 20% reduction in exports over a couple of years. The early export sales data is sadly supporting those projections. Early sales are well off the pace of the last couple of years and are even below the five-year average pace. By the time the corn harvest reaches one-third complete, we usually have roughly 800 million bushels already sold to international markets. Over 2020 and 2021, those early sales exceeded a billion bushels. Currently, we are still below 500 million and the weekly rate of sales is not showing signs of improvement. While global corn supplies are smaller, the US market is relatively tighter than the rest of the world. Thus, US corn is having a rougher time competing for export sales.

That lack of competitive advantage is showing up in nearly every market. As Figure 2 shows, any growth in corn export sales is hard to find. Currently, Honduras is the only significant market that has purchased more corn at this point in the year compared to last year. But even that growth is tiny (it can’t be seen in the chart as it is only 590,000 bushels). The largest decline is with China, continuing the reduction that started with the 2021 crop. Chinese corn purchases surged under the Phase 1 trade deal for the 2020 and 2021 crops. But as the deal approached its end date, sales to China declined quickly. Despite the fall in sales, China remains our second largest customer for corn (the countries listed in Figures 2 and 4 are the current top six markets for each crop, in order). While the Chinese shift explains a majority of the corn export loss, it is not the only major reduction. In fact, all of our major markets, with the exception of Honduras, are down by over 20%. If this continues, we can expect USDA to continue to cut the export projection further.

figures 1-2

For soybeans, the general story on exports is similar, but the early data does look better. USDA’s current export projection sits at 2.045 billion bushels. That is down 110 million bushels from a couple of months ago, is down 113 million from last year, and is down 221 million from 2020. So the soybean market is staring at a roughly 10% pullback in exports over two years. On a percentage basis, it is not as large as the fall in corn exports, but given the relative dependence of soybeans on exports, it’s a significant cut. US soybeans are facing increased competition as global supplies are at record levels and the US dollar continues to strengthen against currencies of both our competitors and customers. With that said, the early sales data has been somewhat encouraging. While sales are not nearly as strong as they were two years ago, they are running just ahead of last year’s pace and the five-year average. And it’s the five-year average line that we should monitor, as USDA’s projection puts us right on the average line by the end of the marketing year

Digging down into the country level data, the changes are relatively small, but it’s our bigger customers that are showing year-over-year growth. While China represents the largest drop for corn, it is the largest gain for soybeans, reversing some of the decline from last year. Mexico and Japan are also in positive territory, but the gains are much smaller. We are seeing some losses in Egypt and the European Union, as they are likely sourcing what they can from Ukraine for now. The challenge will be to maintain this early positive pace, as Chinese crush margins have been weak over the past few weeks and competitors (especially Argentina) have been aggressive in the soybean market.

Over the past couple of months, the markets have been volatile in both directions. That has meant crop prices have been treading water since August. The season-average price estimates based on futures have floated in the $6.50-6.75 range for corn and the $13.50-14.40 range for soybeans for some time now. They are not as high as they were in May, where corn topped out with a $7.40 projection and soybeans reached over $15. But they are also not as low as they were in July, with corn projecting at $5.50 and soybeans falling below $13. Thus far, traders are relying on the feeling that US crop supplies and usage are retreating at roughly the same pace. But as harvest winds down, supplies will be locked in. Then, these export sales will take on even more importance. And while soybean sales look to be in-line with projections, the corn market will need to see some additional purchases to reach expectations.

figures 3-4

For more ag market outlook, see this month’s video.


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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