Grain price trends on an atypical path

Kansas, Nebraska, and somewhat into the Dakotas. That’s where we would expect maybe 2 or 3 million more acres to creep back into production, but there is some caution about that given the severity of the drought.

“It’s something to keep an eye on. I still think that’s my biased of the direction that we’ll see in next year’s acreage reports in March, June and August slightly bigger overall acreage. That’s important because that sets the stage for what our corn and soybean acres can look like.”

Corn

The farmdoc 2023-2024 marketing year balance sheet includes a projection of 92 million planted acres of corn, compared to 88.6 million in 2022, and 88 million planted soybean acres, one-half million higher than 2022.

The U.S. Department of Agriculture’s baseline released in October also had 92 million planted acres for corn in 20232024 and projected 87 million soybean acres planted.

“That would be a return to what I would call our norm now of 180 to 181 million acres total of corn and soybeans, not taking into account prevented plant,” Irwin said.

For yields, USDA’s baseline is a 181.5 bushels per acre for the 2023 growing season.

“USDA has been fairly aggressive on their trend yield estimation for a number of years. We’re not quite that optimistic and we think 180

By Tom C. Doran AGRINEWS PUBLICATIONS

CHAMPAIGN, Ill. — The current crop marketing year price trends have been unusual compared to past trends.

“We’ve been through this old crop/new crop inverse for the entire year with 2022 old crop prices remaining above 2023 new crop prices since Jan. 1, 2022,” said Joe Janzen, University of Illinois ag economist.

The typical train of thought is prices go down in the long run through the marketing year. However, a number of events kept prices strong.

“The first one for soybeans was in February when got news of a poorer crop in Brazil due to the drought. That really had a big impact, especially on old crop soybean prices,” increasing from the $13 area to around $14.75 per bushel, Janzen said.

“It had a little bit less impact in the corn market, but corn got a big boost from the Ukraine-Russia war, starting at the point of the invasion and sharply rallied the next two months in both corn new crop and old crops prices. That put us in that neighborhood of plus$7 corn prices and plus-$15 soybean prices.

“Then we get some news of sort of an easing of the supply chain problem coming out of the Black Sea region with this grain deal between Ukraine and Russia and number of other things that led to lower prices in the summer.”

Corn then got a boost with the U.S. Department of Agriculture estimating lower than expected domestic yields. That put some strength especially in old crop corn and new crop followed. There was a leveling off in the fall to around $6.50 old crop corn and around $6 new crop corn.

Balance Sheets

Janzen reviewed the corn and soybean supply and demand ledgers for 2022-2023 and the current marketing year outlook.

He said U of I’s farmdoc forecasts a 2022-2023 total supply of 15.357 billion bushels with an average yield of 172.3 bushels per acre.

That yield is significantly below where USDA started in early 2022 with a trend line expectation of around 180 bushels an acre national average.

“I think there is a significant amount of uncertainty on the use side for corn,” Janzen said.

USDA estimates 5.275 billion bushels for ethanol while farmdoc projects 5.2 billion bushels. USDA has exports at 2.15 billion bushels and farmdoc estimates 2.075 billion.

Corn ending stocks are at 1.182 billion bushels on USDA’s balance sheet and 1.332 billion in the farmdoc estimate, resulting in stocksto-use of 8.3% and 9.5%, respectively.

“Ending stocks might not be quite as tight as USDA is projecting, but 9.5% stocks-to-use is still his - bushels an acre is fine. With beginning supplies of 1.332 billion bushels, 92 planted acres and an average yield of 180, total supply is estimated at nearly 16.5 billion bushels for the 2023-2024 marketing year,” Irwin said.

On the use side, farmdoc estimates feed and residual 100 million bushels below USDA’s baseline to 5.6 billion.

Ethanol at 5.325 billion bushels and food, seed and residual at 6.775 billion match USDA’s projection. The farmdoc estimate for exports of 2.25 billion bushels is slightly below USDA.

“Exports are a wildcard right now. Much will depend on what happens to corn coming out of Ukraine,” Irwin said.

The farmdoc’s estimate of new crop ending stocks are 1.871 billion bushels compared to 1.722 billion by USDA, putting stocks-to-use at 12.8%, 4.5% above the current marketing year’s projection.

The projected result puts the 2023-2024 season average farm price by farmdoc at $5.40 per bushel and USDA’s at $5.70. The 2022-2023 estimated average price is $6.80.

“If there’s a number we’re most uncomfortable with in these projections, it’s the price forecast. That is a very high price level for a stocksto-use ratio that’s clearly going to significantly exceed 10%. At roughly 9% or 10% you tend to get premium pricing in the corn market, and you don’t have to go much above that, and you no longer have premium pricing,” Irwin said.

“So, there are some real concerns about $5.40 even though clearly bids are at that level or above, but it indicates to us some concerns about downside risk levels on the corn balance sheet.

“This is only a good- weather scenario. I’m 100% sure that in a good-weather year there’s 185-bushel U.S. average corn crop sitting out there, and I don’t think it would take really great weather to even get there. That would add another 400 million bushels onto your ending stocks without any increase on consumption.

“Now you would have more consumption with lower prices, but in a good weather year you’re looking at stocks that would go well north of 2 billion bushels. If that makes it sound like I have a bearish bias in market outlook, you’re hearing right.”

Soybeans

The 2023-2024 farmdoc soybean balance sheet has 88 million acres planted and an average yield of 51.5 bushels an acre, compared to USDA’s baseline of 52.

Beginning stocks of 220 million bushels and production of nearly 4.49 billion bushels puts total supplies to 4.724 billion bushels in estimates by farmdoc.

On usage, the farmdoc estimates match USDA’s with 2.295 billion bushels, exports of 2.05 billion, and seed and residual at 100 million and 23 million bushels, respectively.

The sum is 256 million bushels of soybean ending stocks and a 5.7% stocks-to-use ratio by farmdoc, and year-end stocks of 247 million bushels and a 5.5% ratio in USDA’s projection. Both estimates result in a season-average price of $13 a bushel for 2023-2024.

“Of course, you have to take into account the increase in acreage and potentially big crops coming out of South America before we get too excited, but at least the U.S. balance sheet looks like it’s reasonably tight going forward to next year,” Irwin said.

Tom C. Doran can be reached at 815-410-2256 or tdoran@shawmedia.com. Follow him on Twitter at: @ AgNews_Doran.