SAM Weather Outlooks and 2022 Acreage Estimates

Update for December 17th, 2021

Wheat has been under a great deal of pressure lately which is negatively affecting the corn market. There continue to be “rumors” that the corn crop in China is not what was expected earlier in the season and because of this they are showing more interest in U.S. corn for late-winter or early-spring delivery. Demand for corn exports and corn used for feed demand remain strong as does ethanol. The EIA weekly report showed another impressive week in ethanol production. There are some analysts that believe the USDA may need to increase their corn for ethanol estimate if this strength continues in the market and margins remain strong. As we approach the Christmas and New Year’s, grain markets begin to see “holiday trading” and yearend fund rebalance and repositioning which can cause unpredictable price fluctuations. Add to that the USDA January report which will be announced on the 12th.

Soybeans have not seen the buying interest from China that had been anticipated and the latest NOPA crush number was lower than expected. Soybean oil has been a bit of an anchor to the overall market for several weeks now but could be near the low which could entice some new interest at this reduced price. Dryness in SAM and a fairly limited Chinese supply may also help boost the market if conditions remain unfavorable in the coming weeks. I have more about the SAM weather outlook later in the letter.

Corn/soybean ratios are watched closely to help analysts project how many acres of each crop producers are likely to plant the upcoming season. Typically, if the ratio falls below 2.4 to 1 we see more corn acres and less soybean acres. The DEC22 corn to NOV22 soybean ratio fell to a low of 2.2 to 1 in late November but has since recovered. Even with increasing corn input costs corn offers more profitability right now. This could change though, and any assumptions based on data from previous years may prove to be inaccurate during a year like 2022.

This has contributed to the early 2022 acreage estimates that have offered a wide-range of projections. This year U.S. farmers planted 93.3 million corn acres, currently estimates vary by 9 million acres with a range from 89 million to 97 million for our next growing season.

Weather in South America warrants attention. The 10-day GFS models show a continuation of the very dry conditions for both Southern Brazil and Argentina. In addition, temps in Argentina are expected to trend above normal during this same 10-day period. Recent extended GFS models indicate the possibility for widespread rainfall near the end of the year and into the first week of January across southern Brazil, Argentina remains dry. The Buenos Aires grains exchange say this outlook poses a “big challenge” for both corn and soybean production. A La Niña climate pattern is expected to develop during the regions summer and that is concerning. In their monthly climate report, the exchange said, “We are facing a climatic scenario…that poses strong challenges to production.” And added that “the return of rains could be delayed until mid-March.” (Reuters)

Here in the U.S. the forecast for Christmas offers little hope for a white Christmas for most of the Midwest.