USDA price projections are not good for 2021–2022.
WASHINGTON In its first forecasts for 2021–2022, the US Department of Agriculture published the World Agricultural Supply and Demand Estimates report on May 14. This study included mixed and largely lower values for dairy, eggs, and meat, but higher prices for cereals, oilseeds, and soybean oil.
The recent multi-year highs for these commodities in futures markets despite worries about strong demand and limited supply for some both domestically and internationally, meant that the higher prices for grain, oilseed, and soybean oil were not surprising. The average cash prices anticipated for the entire marketing year were significantly higher than both this year and last year, despite the USDA’s corn projection being viewed as pessimistic and sending new crop futures dramatically lower after the WASDE report (and pulling most other grain futures lower as well).
The average price of corn that farmers will receive in 2021–2022 (starting on September 1, 2021) is expected by the USDA to be $5.70 per bushel, up 31% from the current year’s projection of $4.35 and up 60% from $3.56 in 2019–20. All wheat was expected to cost $6.50 per bu in 2021–22 (starting on June 1, 2021), up 42% from $4.58 in the previous year and 29% from $5.05 this year. According to forecasts, the average price of soybeans was expected to rise by 23% from this year and 62% from 2019–20 to $13.85 per bushel starting on September 1, 2021. Soybean oil prices were predicted to average 65¢ per pound in 2021–2022, up 15% from 55¢ this year and 120% from 29.65¢ the previous year. The cost of soybean meal in the estimated price for 2021–22 was $400 per ton, up 34% from the previous year but down $5 from 2020–21. On October 1, 2021, the new marketing years for soybean oil and meal will start.
Corn, the biggest commodity grown in the US, attracted the greatest attention in the WASDE report. On September 1, 2022, the USDA projected the carryover of corn to be 1,507 million bus, a 20% increase from the 1,257 million predicted for the current year. 14,990 million bus of corn were expected to be produced, up 6% from 2020 and the second-highest amount ever recorded after 15,148 million in 2016. A decrease in exports of 325 million bus, or 12%, more than offset an increase in the use of corn for ethanol of 225 million bu, or 4.5%, while the projected use of corn for feed remained steady from 2020–21, primarily because of high maize prices.
At 1,344 million bus, the 2022 carryover prediction for corn was much higher than the average of pre-report trade expectations. On May 14, new crop corn futures dropped roughly 18¢ a bu, and they ended the week down roughly 60¢ to 90¢ a bu, or 10% to 15%, overall.
Some speculated that while the USDA report wasn’t very pessimistic, it also wasn’t bullish enough to keep maize futures rising to eight-year highs.
Corn has undoubtedly been the market leader, in part because of China’s recent large purchases and in part because of predictions that corn used for ethanol will rebound as travel grows and COVID-19 limitations loosen.
For the current marketing year, China purchased roughly 3,876,000 tonnes of US corn in March. After taking a break in April, it started purchasing again this month, acquiring an additional 9,384,000 tonnes as of May 20. Nevertheless, China canceled at least 420,000 tonnes of sales that were initially scheduled for 2020–21 earlier in May, and all acquisitions made in May were for the 2021–22 marketing year. According to China’s General Administration of Customs, the country imported 8.58 million tonnes of corn (from all sources) in calendar 2021 as of April, a 301% increase over the same period the previous year.
Regarding ethanol, the USDA maintained its April projection of 4,975 million bus, or 35% of 2020 corn production, for the current year. However, it first estimated 5,200 million bus for ethanol usage in 2021–2022, which is still less than the 5,378 million bus used in 2018–19.
For the remainder of the season, weather will be the primary factor influencing the corn market. Corn prices received a boost last week when the USDA announced that planting progress in the 18 key states was 80% as of May 16, which is higher than the 78% recorded a year ago and the 68% average for the date in 2016–20, but lower than the 84% anticipated by the trade.
Even though the WASDE report’s numbers for wheat and soybeans were largely neutral in comparison to corn, there was a discernible pull of corn on the wheat and soybean markets. In the week ending May 14, wheat futures fell roughly 50¢ to 80¢ a bu, or 6% to 10%, with Kansas seeing the most drops (73¢ to 79¢ a bu).
The first survey-based winter wheat prediction, at 1,283 million bus, was up 10% from the previous year. The USDA projected 2021 wheat production, which makes up the majority of the 2021–22 supply, at 1,872 million bus, up 2.6% from 2020. Soft red winter wheat output was predicted to be up 25% at 332 million bus, white winter wheat output to be down 10% at 220 million bus, and hard red winter wheat output to be up 11% at 731 million bus in 2020. The Pacific Northwest’s dry weather was a major factor in the decline in white wheat production.
The new wheat marketing year started on June 1st, and the years 2021–2022 were the emphasis. On June 1, 2022, carryover was predicted to be 774 million buses, the lowest amount in seven years and an 11% decrease from the forecast of 872 million buses this year. The USDA’s wheat carryover figures for this year and the following year exceeded trade projections. Despite greater production expectations for 2021, lower beginning stock levels led to a forecasted 2,869 million bus supply, a 3% decrease from the current year. Wheat usage for food was somewhat increased, while wheat use for feed, which is forecast to reach 170 million buses in 2021–2022 (the most since 2013–14), increased by 70% as a result of high corn prices. US exports of wheat in 2021–2022were predicted to be 900 million bushels, 7% less than the previous year, as a number of export rivals are anticipated to have greater supply and US wheat prices continue to be uncompetitive in many overseas markets.
More information about the hard red winter wheat harvest was released last week at the Wheat Quality Council’s annual tour, which revealed generally positive crop prospects in Kansas, the leading hard red winter wheat state.
In contrast to corn and wheat, all soy complex futures saw gains on May 12 following the announcement of the WASDE statistics; however, only soybean oil managed to maintain those gains for the duration of the week. For the week ending May 14, soybean futures showed comparatively small decreases of roughly 4½ to 33¢ a bu.
Soybean carryover projections from the USDA were close to trade expectations, confirming theories of limited supply both domestically and internationally. The US was expected to produce 4,405 million bushels of soybeans in 2021, up 7% from 2020; nevertheless, similar to wheat, the total supply was lower than the previous year because of considerably lower initial stockpiles. It is anticipated that the rising renewable diesel industry’s strong domestic demand for soybean oil would maintain the oil share of the soybean crush above normal.
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The projected 12,000 million pounds of soybean oil used for biofuel in 2021–2022 represents a 26% increase over the current year and might spark a long-standing controversy in the maize market about what should be consumed or fuel.
For the week ending May 14, soybean oil futures increased by 2% to 5%, in contrast to soybeans and soybean meal. Cash prices for soybean oil and a number of other edible oils have recently reached multiyear highs, if not all-time highs, and it is not anticipated that these prices will decline until the fall soybean harvest.
In contrast to those for grains and oilseeds, expectations for other commodities were significantly different.
It was predicted that milk output would reach 230.3 billion pounds in 2022, up 1.1% from 227.9 billion pounds in 2021. All milk was expected to cost $18.50 per cwt on average, up 1.4% from 2020 but down 2.4% from the current year prediction of $18.95. Forecasts for 2022 put Class 3 milk—used to make most varieties of cheese—at $16.85, down 4.8% from this year, and Class 4 milk—used to make butter and dry goods—at $15.70 a cwt, down just 5½, or 0.3%.
Prices for butter and cheese were particularly erratic during the coronavirus pandemic since a significant portion of both were obtained through foodservice and the government’s food box program. According to USDA estimates, a pound of cheddar cheese will cost, on average, $1.71½.
Calendar-year egg production was predicted to reach 9,470 million dozen in 2022, a 1.4% increase over the 9,341 million predicted for the present year. It was predicted that the average cost of eggs will increase by 2.5 from 2021 to $1.15 a dozen in 2022. Prices for eggs were predicted to rise 31% from 95¢ to $1.24 a dozen in the fourth quarter of 2021.
However, some chicken parts have lately surged to record highs due to restricted supplies and increased demand for wings and breasts, the latter the outcome of chicken sandwich “wars” among fast-food outlets. Red meat also suffered significant price swings in 2020 due to COVID 19 (primarily red meat). Turkey, hog, and broiler meat output was predicted to increase in 2022, but beef production was predicted to decline by 2%.
While hog prices were predicted to be somewhat lower in 2022, prices for steers, broilers, and turkeys were predicted to be higher. However, those projections don’t always predict how retail meat costs will move.
The whole market is anticipated to stay erratic as it searches for a new post-pandemic norm in terms of supply and demand, and weather-related fluctuations will affect the price of grains and oilseeds throughout the growing season.