Update for February 19th, 2021
The annual Ag Outlook Forum announced the USDA acreage early estimates for the 2021 growing season yesterday. It’s important to note that the projections for this annual event are not based upon any surveys like the March 31st USDA Acreage Report. Early forecasts call for 92 million planted corn acres this season, and close to 90 million soybean acres. Historically these estimates run on the low side by about 2 million acres, if this holds true and U.S. producers’ plant 94 million acres and trend-line yields are realized the U.S. carryout could reach 1.67 billion bushels. If U.S. farmers plant a combined total of 182 million acres to corn and soybeans this season it will set a new record.
Brownfield Ag and Progressive Farmer both report that USDA Chief Economist Seth Meyer expects a positive outlook for the agricultural economy but cautions that some uncertainties remain. “Supply chain disruptions have moderated but at some costs. There are some costs embedded in the system between the animal producer and the meat wholesaler that remains, and they may remain for awhile as an offset to prevent further disruptions of the type we saw earlier in 2020.” Looking at prospects for crops and livestock he stated that currently things look good, “based upon continued strong domestic demand and good exports. We need both in order to achieve those prices that we’ve forecast, and we expect that they will be there. Trade particularly to China is going to be a key element for the 2021 crop and livestock sectors, and as always the weather will have the last say on what gets planted here in the Northern hemisphere and eventually what those balance sheets look like.”
Traders have been using various acre/yield combinations to develop various scenarios for the upcoming crop season. Most are now under the assumption that the U.S. will see something between 83.5 to 85 million harvested corn acres in 2021 with an average yield between 176 to 180 bushels per acre. Quite an optimistic outlook when you consider corn yields over the last 3 seasons: 2020-172 bushels per acre; 2019-167.5 bushels per acre and 176.4 in 2018. The current outlook from the USDA for on the farm U.S. corn prices for 2021-22 is $4.20 per bushel which seems quite conservative unless we see a large drop in demand and cancellations of export orders. Also remember that the U.S. has drought conditions persisting throughout large portions of the Corn Belt and without substantial relief final yield results will suffer.
The graph shown below from the Van Trump Report gives a clear visualization of the relationship between planted corn acres over the past 15 years and the farm price.
The estimatated jump in soybean acres for the 2021 growing season is sizable when compared to past seasons: 2020-83.1 million acres, 2019-76.1 million acres. Most traders are looking for the harvested acres number to come in between 89.3 and 89.9 million acres and are using an average yield of 50-51 bushels per acre. If demand remains strong and the current weather outlooks don’t change drastically the balance sheets for soybeans will remain tight.
Like the corn graph shown above the soybean illustration shown below from the Van Trump Report gives a clear visualization of the relationship between planted soybean acres the past 15 years and the farm price.
Spring crop insurance price discovery continues. At the close of yesterday’s market, the average February price for DEC corn was $4.53/bu. and the average NOV price for soybeans was $11.71/bu. There are only 6 trading days remaining in the month and unless we see a major turn-around to the downside during this period we will likely see the highest spring price guarantees in many years.
Rainfall across Argentina in recent weeks has raised expectations for the corn and soybean production this season. The Rosario Grains Exchange reported in their monthly report that the rainfall in recent weeks has been a “turning point” that has diminished fears of a repeat to the 2018 drought that caused heavy crop losses. The Buenos Aires exchange explained that, “Rainfall towards the end of January has improved the condition of soybean fields over much of the central agricultural area” and stated that acres for commercial-use corn is in good condition. (Reuters) Abundant precipitation across large portions of Brazil have boosted final yields with reports ranging between 60 – 70 bushels per acre. Wet conditions are hindering harvest progress which is now the slowest in a decade. These lingering wet conditions also have Brazilian producers concerned with the outlook for this season’s Safrinha crop (which accounts for the majority of the corn produced in the nation) which could likely see pollination delayed into the much hotter and drier portion of the season limiting yield potential. Additionally, NOPA crush numbers have exceeded expectations for the month of January, increasing this year’s January crush to 184.6 million bushels from 176.9 million last year. This sets a new January crush record and is also the second strongest month ever in history. This has fueled the belief that the USDA is still not on track with their U.S. soybean demand forecasts and many in the trade think the agency will have no choice but to increase the export estimate higher in upcoming reports.
The latest update to the U.S. Drought Monitor is included below. The drought that originated in the western and southwestern U.S. made its way to the east during the 2020 growing season greatly effecting conditions across ND, SD, IA, NE and KS. A band of moderate drought has also developed is expanding across areas of IL and into IN and OH.
Over the past month drought conditions have changed in many portions of the U.S. Very few areas have seen substantial changes in severity with only a few exceptions. Moving into the spring NOAA expects the drought will generally persist with a few regions of intensification possible and expansion into the south- central Plains is expected.
The 3-month outlook for March – May shown below indicates above to much above temps for almost the entire U.S. Precipitation is varied, both maps are shown below.