Corn, soy drift lower on improving South American weather forecasts
- Corn down 1-3 cents
- Soybeans down 6-9 cents; Soymeal up $0.70/ton; Soyoil down $0.68/lb
- Chicago wheat up 4-6 cents; Kansas City wheat up 6-8 cents; Minneapolis wheat up 3-4 cents
*Prices as of 7:05am CST.
Good Morning! Thank you to everyone who participated in last week’s Farm Futures Ag Business Summit and an extra shout-out to those of you who joined my session last Thursday afternoon to check out 2022 acreage forecasts both in person and virtually.
For those of you who weren’t able to make it, I’ll do a quick brief of our 2022 acreage forecasts this morning. The key point is that in the last couple months of 2021, fertilizer prices rose to levels that are forcing producers to make big changes to 2022 acreage allocations.
To read the full article, check it out on our website. Have a great week, everyone!
2022 soybean acres to top corn for second time in history
Farm Futures January 2022 survey finds rising costs impact 2022 acreage decisions
The past year’s run-up in fertilizer and input prices will have major consequences for 2022 acreage allocations and will have the most significant impact on growers’ planting decisions since 2008-2009, according to the January 2022 Farm Futures survey.
Some 93% of farmer respondents in the survey expect high input costs to slash 2022 profits compared to last year. The survey, conducted via email questionnaire during December 3-20, 2021, found that high input costs will drive U.S. growers to plant fewer corn acres in 2022 in favor of other crops with less expensive production costs.
After totaling the responses from 613 growers, Farm Futures projects 2022 corn acreage at 90.4 million acres in 2022 and soybean acreage at 92.4 million acres. It will be only the second time in U.S. history more soybeans than corn will be planted to the tune of 1.2 million acres.
The last – and only – time soybean acreage surpassed that of corn was in 2018 when 296,000 more acres of soybeans than corn were planted.
If realized, the data points to the largest soybean crop on record, surpassing 2017’s record of 90.2 million acres. Using trendline yields from USDA’s baseline projections, 2022 production could rise to a record breaking 4.70 billion bushels.
Around half of survey respondents expected to buy some inputs this spring, with fuel (66%) and potash (33%) hovering at the top of farmers’ lists. But two other inputs on growers’ spring shopping lists provide some glaring indicators about 2022 acreage intentions.
Over 33% of growers planned to buy UAN fertilizer this spring and an additional 29% will purchase urea ahead of planting activities. These spring applications are more characteristic of regions with warmer winter soils, thus favoring soybean acreage. And with 66% of growers still planning to apply nitrogen this spring, soybeans appear to be a safe bet.
Corn acreage will dip nearly 3 million acres from last year’s sowings as per acre production costs in Illinois for growers looking to yield 200 bushels per acre (bpa) have soared 58% to 69% higher over the last six months. With lower acreage, USDA’s trendline yield projections of 181.0 bpa would leave 2022 U.S. corn production at 14.92 billion bushels, the third largest corn crop in U.S. history.
The wheat wrinkle
Double crop winter wheat and soybean rotations have likely already consumed many of those corn acres. Farm Futures projects 2022 winter wheat acreage at 35.2 million acres, up 4.7% from last year. USDA’s current forecast for 2022 winter wheat seedings stands at 34.4 million acres.
Further evidence of farmers balking from high input costs also surfaced in the 2022 spring wheat and durum forecasts. The Farm Futures survey found 10.8 million acres of spring wheat and 1.5 million acres of durum are currently expected to be planted in the Northern Plains this spring.
These totals are 5.4% and 6.5% lower, respectively, then last year. Spring wheat sowing typically requires higher fertilizer applications. In a region where fertilizer access is less consistent than along the Mississippi River corridor, the added costs of high fertilizer prices may not be worth the hassle this year.
Provided the Plains see some drought relief over the next couple months, trendline wheat yields could rise to 49.1 bpa in 2022, resulting in 1.92 billion bushels of wheat production. However, after the 2021 crop shortfall in the Northern Plains, the projected 2022 crop would not likely relieve current supply stress on the wheat market.
Using USDA demand estimates for 2022/23, ending wheat stocks under these forecasts will fall to 610 million bushels. That will tighten the stocks-to-use ratio by 2.5% to 29.5% - the tightest wheat supply environment since 2013/14. Unless Europe and Russia harvest bumper crops this summer, high prices are likely here to stay.
Total acreage outlays
Farm Futures projects 230.3 million acres of corn, soybeans, and wheat will be planted in the U.S. this year. That will be the fifth largest acreage in history for these three crops. It represents a 1.4% increase in acreage from the last year. These projections hang increasingly in the balance of the Plains.
In that region, smaller cattle herds due to lingering drought and $6/bushel corn could shift some forage acres into row crop production this spring. If fertilizer prices continue to fall over the coming weeks, this acreage forecast could easily shift more corn acres into production in 2022, likely at the expense of soybeans and spring wheat.
Rising Russian tensions lifted the dollar and thwarted any upward moves in the corn complex this morning. Improving weather conditions in South America also took a toll on corn prices. A lackluster Cattle on Feed report last week didn’t add any aid, either. Corn futures edged $0.01-$0.03/bushel lower this morning as a result.
Last Friday’s Cattle on Feed report from USDA saw a new record high for January 1 cattle on feed inventories, but placements and sales for slaughter all ticked lower as $6/bushel corn, lingering drought, and COVID-induced processing backlogs continue to batter the cattle industry.
January 1, 2022 Cattle on Feed inventories came in at 12.037 million head, up 52,000 head from the previous month, setting a new January 1 high. The figure surpassed even the highest pre-report trade estimate of 11.95 million head, suggesting even amidst the market chaos plaguing the cattle industry, producers are attempting to respond to expansion signals from the cattle market.
But the chaos showed up in other areas of the monthly report. Monthly placements for December 2021 fell 8,000 head to 1.963 million head. To be sure, December placements are typically lower than November volumes as holiday demand wanes and substitute meat products rise in consumers’ preference lists as New Year’s resolution diets kick in.
But other factors are at play as well. Corn’s recent rally past the $6/bushel mark on rising input costs and increasingly competitive soybean acreage prospects represents a high-cost production environment for cattle producers that is not likely sustainable if beef prices show any sign of weakness.
And that is a real threat in the omicron era as meat packing plants struggle to staff fabrication lines. USDA reported lower monthly sales for slaughter in December 2021 to the tune of 16,000 head. Total sales for slaughter volumes in December totaled 1.857 million head, which was significantly below even the lowest pre-report analyst guess of 1.868 million head.
USDA expects 37% of 2021 U.S. corn production to be consumed by feed and residual sources before the 2021/22 marketing year ends in August 2022. But with more cattle producers feeling the profit margin squeeze of feeding $6/bushel corn and processing line speeds slowing, corn purchases are an increasingly tough sale to the livestock industry.
Soybean prices followed those of corn lower this morning on a strengthening dollar, improving South American weather forecasts, and easing export volumes. But old crop prices rested comfortably above the $14/bushel benchmark despite futures falling $0.07-$0.09/bushel.
Wheat looks to be the sole beneficiary of the tensions between Russia and the rest of the world as Russia plots a potential military invasion into Ukraine – and with good reason.
Even with a stronger dollar, U.S. wheat prices rose $0.03-$0.08/bushel overnight as tensions continue to mount in the Black Sea. And while Ukraine has likely already shipped most of its 2021/22 exports – government totals estimate that 68% of Ukraine’s exportable supplies this year have already been shipped – looming economic sanctions against Russia could hinder even more exportable supplies from reaching the world market.
Russia is likely to be the world’s second largest exporter of wheat in 2021/22 while Ukraine is likely to be the world’s fourth largest exporter this year.
But that’s only if a potential invasion does not impact global trade flows. In an era of rising food inflation across the globe, triggered largely by rising wheat prices, the timing of Russia’s antics is not only dangerous for citizens of Ukraine, but it can easily be considered an inhumane move that will cause impoverished citizens around the globe to continue struggling to afford basic foodstuffs, especially as Russia continues to limit its wheat exports.
War is awful for the global economy and its often the most vulnerable populations who pay the highest price.
Two snow systems will sandwich the Heartland today, according to NOAA’s short-range forecasts. A system in the Northern Rockies will shift south and east into the Northern Plains this evening and through parts of the Central and Southern Plains through the day tomorrow. Cool temps and up to two inches of snow are likely over the next 24 hours.
The second system is currently hovering over the Great Lakes region and will shift into the Eastern Corn Belt later this evening. About one to three inches of accumulation are predicted in this system.
More cold temperatures are on the way for the Upper Midwest through Thursday. But February forecasts are trending warmer for the Midwest, bringing relief to workers who brave outside chores every day.
S&P 500 futures dipped 20.75 points (0.47%) lower to $4,369.25 overnight as markets try to contain worries about a potential Russian invasion of Ukraine and tightening Federal Reserve monetary policies. The Fed is expected to announce its first rate hike on Wednesday, likely to be scheduled in March.
A recovery to the tech sector was thwarted overnight as Nasdaq 100 futures drifted 104.75 points (0.73%) lower to $14,321.75 following a weak European trading session.
Also worth a read on our website, FarmFutures.com:
- Bryce Knorr’s annual hedging study finds soybean hedgers ruled in 2021. For the winning – and losing – marketing strategies for the last year, check out Knorr’s latest column.
- Darren Frye has three tips to help improve winter meetings with your banker.
- While I was watching corn and soybean acres last week, Naomi Blohm was keeping track of hogs and rice. Blohm shares why these markets are going to be among the hottest in 2022.
- It’s the second year in a row South America has experienced drought. Matthew Kruse explains why this year is more significant.
|Morning Ag Commodity Prices - 1/24/2022|
|Contract||Units||High||Low||Last||Net Change||% Change|
|MAR '22 CORN||$ / BSH||6.195||6.1275||6.13||-0.0325||-0.53%|
|MAY '22 CORN||$ / BSH||6.1675||6.105||6.1075||-0.0325||-0.53%|
|JUL '22 CORN||$ / BSH||6.11||6.05||6.0525||-0.0325||-0.53%|
|SEP '22 CORN||$ / BSH||5.8025||5.755||5.76||-0.025||-0.43%|
|DEC '22 CORN||$ / BSH||5.665||5.6275||5.6325||-0.02||-0.35%|
|MAR '23 CORN||$ / BSH||5.74||5.705||5.715||-0.015||-0.26%|
|MAY '23 CORN||$ / BSH||5.76||5.76||5.76||0.0025||0.04%|
|MAR '22 SOYBEANS||$ / BSH||14.2375||14.0675||14.08||-0.0625||-0.44%|
|MAY '22 SOYBEANS||$ / BSH||14.32||14.1475||14.155||-0.075||-0.53%|
|JUL '22 SOYBEANS||$ / BSH||14.355||14.1775||14.185||-0.0875||-0.61%|
|AUG '22 SOYBEANS||$ / BSH||14.0625||13.925||13.925||-0.0775||-0.55%|
|SEP '22 SOYBEANS||$ / BSH||13.485||13.3625||13.3625||-0.0775||-0.58%|
|NOV '22 SOYBEANS||$ / BSH||13.21||13.0725||13.0875||-0.075||-0.57%|
|JAN '23 SOYBEANS||$ / BSH||13.215||13.0825||13.1075||-0.065||-0.49%|
|MAR '23 SOYBEANS||$ / BSH||13.0775||12.9725||12.9875||-0.0675||-0.52%|
|MAY '23 SOYBEANS||$ / BSH||13.05||12.9425||12.9475||-0.08||-0.61%|
|MAR '22 SOYBEAN OIL||$ / LB||63.35||62.14||62.29||-0.71||-1.13%|
|MAY '22 SOYBEAN OIL||$ / LB||63.38||62.25||62.38||-0.69||-1.09%|
|MAR '22 SOY MEAL||$ / TON||396.4||392||393.3||0.6||0.15%|
|MAY '22 SOY MEAL||$ / TON||395.5||391.4||392.5||0.4||0.10%|
|JUL '22 SOY MEAL||$ / TON||394.8||390.8||392||0.3||0.08%|
|AUG '22 SOY MEAL||$ / TON||388.6||385.8||387.2||0.8||0.21%|
|SEP '22 SOY MEAL||$ / TON||380||378.2||379||0.4||0.11%|
|MAR '22 Chicago SRW||$ / BSH||7.9625||7.805||7.8375||0.0375||0.48%|
|MAY '22 Chicago SRW||$ / BSH||8.01||7.855||7.8825||0.035||0.45%|
|JUL '22 Chicago SRW||$ / BSH||7.89||7.7675||7.8||0.0575||0.74%|
|SEP '22 Chicago SRW||$ / BSH||7.8975||7.7825||7.8175||0.0625||0.81%|
|DEC '22 Chicago SRW||$ / BSH||7.935||7.8175||7.865||0.0675||0.87%|
|MAR '22 Kansas City HRW||$ / BSH||8.0875||7.9725||8.0025||0.07||0.88%|
|MAY '22 Kansas City HRW||$ / BSH||8.1125||8||8.03||0.0675||0.85%|
|JUL '22 Kansas City HRW||$ / BSH||8.1275||8.02||8.0475||0.0625||0.78%|
|SEP '22 Kansas City HRW||$ / BSH||8.1625||8.065||8.105||0.0875||1.09%|
|DEC '22 Kansas City HRW||$ / BSH||8.235||8.1325||8.1725||0.08||0.99%|
|MAR '22 MLPS Spring Wheat||$ / BSH||9.5||9.36||9.3975||0.0375||0.40%|
|MAY '22 MLPS Spring Wheat||$ / BSH||9.45||9.315||9.355||0.04||0.43%|
|JUL '22 MLPS Spring Wheat||$ / BSH||9.33||9.2675||9.27||0.03||0.32%|
|SEP '22 MLPS Spring Wheat||$ / BSH||9.065||8.96||8.99||0.0225||0.25%|
|DEC '22 MLPS Spring Wheat||$ / BSH||8.9775||8.93||8.935||0.0325||0.37%|
|MAR '21 ICE Dollar Index||$||95.99||95.625||95.97||0.334||0.35%|
|MA '21 Light Crude||$ / BBL||86.09||84.55||84.96||-0.18||-0.21%|
|AP '21 Light Crude||$ / BBL||85.1||83.58||84.03||-0.11||-0.13%|
|FEB '22 ULS Diesel||$ /U GAL||2.7152||2.6787||2.6932||0.002||0.07%|
|MAR '22 ULS Diesel||$ /U GAL||2.661||2.6239||2.6406||0.0033||0.13%|
|FEB '22 Gasoline||$ /U GAL||2.4657||2.4333||2.4422||-0.0002||-0.01%|
|MAR '22 Gasoline||$ /U GAL||2.47||2.4381||2.4477||0.0012||0.05%|
|JAN '22 Feeder Cattle||$ / CWT||0||#N/A||160.275||0||0.00%|
|MAR '22 Feeder Cattle||$ / CWT||0||#N/A||163.3||0||0.00%|
|FE '21 Live Cattle||$ / CWT||0||#N/A||137.925||0||0.00%|
|AP '21 Live Cattle||$ / CWT||0||#N/A||142.1||0||0.00%|
|FEB '22 Live Hogs||$ / CWT||0||#N/A||86.2||0||0.00%|
|APR '22 Live Hogs||$ / CWT||0||#N/A||94.95||0||0.00%|
|JAN '22 Class III Milk||$ / CWT||20.28||20.28||20.28||-0.01||-0.05%|
|FEB '22 Class III Milk||$ / CWT||20.64||20.54||20.64||0.1||0.49%|
|MAR '22 Class III Milk||$ / CWT||21.79||21.55||21.75||0||0.00%|
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