February 5, 2021
According to a new Farm Futures survey, U.S. corn producers say they will increase corn acreage 4.1% from year prior, to 94.7 million acres in 2021.
If realized, 2021 corn acreage will be the third largest over the past 75 years, trailing only 2012 (97.3 million acres) and 2013 (95.4 million acres) acreages. Based on a conservative trendline yield estimate of 177.4 bushels per acre, 2021 corn production could reach 15.3 billion bushels, besting 2016’s record haul of 15.1 million bushels as the highest U.S. corn output on record.
The January 2021 survey of 806 farmers shows farmers favor planting more corn this spring, although planting intentions for both corn and soybeans are up from 2020 levels. And a fair number of farmers intend to stick with their usual crop rotation.
“We are sticking with our crop mix,” says Mark Wachtman, who raises popcorn, specialty soybeans, wheat, and double crop soybeans on his northwestern Ohio farm and operates a trucking business on the side. Many farmers, including Wachtman, are taking a wait and see approach with their acreage.
“Corn prices may go up like soybeans have,” Wachtman mused prior to January 2021 price rallies. “Should that happen, however, we will have to buy corn acres if soybeans rally through the stratosphere.
Betting on pandemic recovery
A fair amount of uncertainty remains in the back of many producers’ minds amid dry South American weather forecasts, Chinese demand, and ever-present pandemic volatility, according to the survey. Farmers who say they will plant more corn acres are betting on a post-pandemic recovery that boosts ethanol output, along with rising global export demand, for starters. But lower production costs late in 2020 may have also factored into the decision.
Wholesale urea and UAN prices fell to three-year lows in 2020, offering farmers prices they could not resist. Data from the Farm Futures survey finds 59% of respondents booked seed, fertilizer, and chemical inputs last fall to lock in the best discounts.
Rising fertilizer prices at 2020’s close signaled that farmers were buying more fertilizer with expectations to plant more corn in 2021. Yet other producers took advantage of cheaper fertilizer costs last fall before prices began to rise at year-end. “We purchased 95% of our fertilizer in September and October,” Wachtman shares.
Big crop, big demand
While a 15.3 billion-bushel-crop in 2021 would go a long way toward stabilizing domestic corn supplies, it could easily be overpowered by rising demand if yields take a hit during this year’s growing season.
Carryover stocks are already tight. USDA’s January 2021 reports trimmed 2020/21 U.S. ending corn stocks to 1.55 billion bushels – the tightest volume since 2013/14. Paired with the third-highest usage rate on record, March 2021 Chicago corn futures rallied nearly $0.43/bushel higher in the days following the report’s release.
To be sure, in the U.S., cattle inventories notched record highs in December, with 12.04 million head of cattle reported on feed. Overseas demand is soaring, as corn export loading paces jumped 14% higher than the five-year average in the first quarter of the 2020/21 marketing year – months before peak corn export volumes typically ramp up.
Higher soy acres too
Based on the new Farm Futures survey farmers said they planned to increase 2021 soy acres by just 1.4 million acres, to 84.5 million. A conservative yield estimate of 52.2 bushels per acre would likely place 2021 soybean production shy of 4.4 billion bushels. That total would be the second-largest crop on record.
A year ago, the soy-corn price ratio slightly favored corn, as U.S. soybean export shipments to China slowed. By the time fall harvest activity ramped up in September, hefty export loading paces boosted the ratio past the pivotal 2.5 benchmark, indicating a pointed market preference for soybeans. As 2020 ended and soybean prices soared past $13/bu., market demands were clear – soybean acreage would more likely be rewarded with profits than corn.
Yet, soybeans will only see a modest planting increase. Why?
Soybean futures prices continue to be inverted with higher price offerings for nearby contract months relative to new crop prices; that’s a signal the market needs soybeans now, but not necessarily later. Current export demand from China could diminish through the middle of the year as South American crops go through export channels.
A larger soybean crop expected in 2021 compared to last year could adequately replenish supplies if prices offer enough incentive for an acreage shift. However, “if South America does have a short crop, rising tides tend to raise all boats,” Wachtman cautions.
Tight stocks lure soy acres
Ending supplies for soybeans are expected to be at their second-tightest level since 2013 by the end of this summer, especially as domestic processors set new crush records on rising domestic and international demand. A weak dollar and high-priced substitutes have made soy demand rationing over the past month more challenging, especially with rising global livestock feed demand
The U.S. hog herd rose to its fourth-highest quarterly inventory level by December 1. And at some point in the first quarter of 2021 China expects its pig herd to be fully restored to its pre-African Swine Flu volume – a factor that has already largely driven record-setting U.S. soy exports to China.
The U.S. is expected to use 4.5 billion bushels of soybeans in 2020/21 alone. As global stocks continue to dwindle and the pandemic economy lingers, soybeans may offer a safe alternative to U.S. producers hedging their bets on corn
Wheat acreage breaks shrinking trend
Constricted Black Sea wheat supplies sent many smaller buyers to U.S. shores in search of wheat. The dollar dropped to three-year lows just after the New Year, providing international buyers – who continue to bulk up wheat storage – a lucrative option for wheat.
“We have 2021 wheat 100% sold,” says Wachtman. “We started selling 2022 wheat in late December 2020.”
Rising wheat prices last fall led to a 3% increase in winter wheat plantings in 2021. Farm Futures' January 2021 survey data is more optimistic, suggesting winter wheat acreage planted in fall 2020 will rise 6% from 2019 levels, to 32.4 million acres.
Of course, severe drought conditions in the High Plains and West over the past several months could limit yield potential. But that just adds more to the story.
The number of Farm Futures survey respondents who reported planting winter wheat for harvest in 2021 increased by 15%. This suggests more farmers may add a wheat-soybean rotation to their crop mix or switch smaller, less productive fields to wheat in 2021 amid lucrative futures prices.
Meanwhile, spring wheat growers eagerly await the chance to take advantage of higher prices. The January 2021 Farm Futures survey found 2021 spring wheat acreage is likely to increase by nearly 3% from a year ago to 12.6 million acres.
Farm Futures estimates that total wheat acreage planted for harvest in 2021 will come in at 46.4 million acres – a 4.5% increase from 2020 planted acreage and the first time U.S. planted wheat acres will rise since 2018.
Factors to watch
According to our new survey, combined 2021 corn, soybean, and wheat acreage will likely total 225.6 million acres – a 3% increase from the year prior and the largest acreage for the crop trio since 2018. But there are several caveats to that forecast that could sway farmers’ 2021 planting intentions:
If Chinese soybean demand completely reverts to Brazilian supplies in the next couple months (as it did a year ago) and fuel demand finally rebounds, corn acreage will be a more lucrative bet for farmers going into 2021 planting season.
Soybeans could win the battle if crop shortfalls in South America are substantial.
As always, profit opportunity will come down to timing. Fundamental supply and demand factors support current price levels but remember: markets rarely stay in one place for long.
The seemingly ever-present global COVID-19 pandemic will continue to influence prices and planting decisions as spring approaches.
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