FORT COLLINS, (Colo.): New-crop Chicago corn and soyabean futures are at or near record levels for the time of year, and that should boost US farmers’ enthusiasm to plant both this spring and potentially relieve the market of historic tightness.
However, which of the United States’ top crops producers will prefer is still up for debate given extremely dynamic market conditions. Recent corn strength and farmers’ classic love of the yellow grain could give it the edge, especially with the prospect that No. 4 exporter Ukraine’s upcoming growing season could be in jeopardy.
But more corn acres would mean less room for soyabeans, and supplies of the oilseed may be squeezed even further if US farmers fail to plant a near-record area.
Last month, CBOT December corn futures averaged $5.90 per bushel, up 29 percent from last year. That is the second-highest February average for new-crop futures after $6.01 in 2011.
November soyabean futures last month averaged $14.33 per bushel, up 21percent on the year and topping 2011’s record by 6percent. In 2011, the corn harvest price (average of new-crop futures in October) jumped another 5percent from February, but it fell 10 percent for soyabeans.
New-crop soyabeans in February traded 9percent higher than in January on average, the biggest jump between the two months since 2008 and well above last year’s 2.6percent. New-crop corn gains between the two months at 5percent were the highest since 2011 and compare with a 3percent gain last year.
The average prices of new-crop futures in February represent insurance guarantees to US farmers for the upcoming harvest and the sky-high prices imply comfortable profits and potentially strong plantings of both corn and soyabeans. The new-crop soyabeans-to-corn ratio averaged 2.34 in January and 2.43 in February, though it has crashed back down near 2.36 to begin March. The ratio can be an indicator of profitability potential, and values near or above 2.5 tend to favour soyabeans.
High input costs and uncertain availability undoubtedly complicate that analysis this year, but the prices alone are certainly swinging toward corn right now. Either way, there are reasons now for the market to be stressed over too few acres for both corn and soyabeans given the situation in Ukraine, soyabean losses and a to-be-determined corn crop in South America, and tight global stocks relative to demand for both crops.
BOTH AT RISK
The US Department of Agriculture last week tentatively pegged 2022 US corn and soyabean plantings at 92 million and 88 million acres, respectively. That was very close to industry analysts’ corn average of 91.8 million, but the soyabean number was more than 1 million below the trade.
Although 88 million soyabean acres is 1percent more than last year and the third-highest ever, USDA’s balance sheet suggests those plantings are insufficient to maintain or expand US soyabean supplies into 2023. That is with the assumption domestic soyabean use in 2022-23 will rise 3.3percent from the current year.
USDA shows 2022-23 US soyabean stocks-to-use at 6.7percent versus 7.4percent this year and a carryout of 305 million bushels, down 20 million on the year. Just for fun, putting 89 million acres on USDA’s balance sheet and changing nothing else results in ending stocks of 357 million bushels.
USDA’s assumptions for corn, including a 181 bushel-per-acre yield, suggest a reasonable build in 2022-23 US stocks with 92 million acres and demand nearly identical on the year. Ending stocks and stocks-to-use of 1.965 billion bushels and 13.2percent compare with 1.54 billion and 10.4percent this year.
The 2022-23 corn export projection of 2.35 billion bushels is 400 million lighter than 2020-21’s record, but that number has significant upside pending what happens to Ukraine’s upcoming crop or exports. The yield, four bushels above record, is also another potential item for debate. USDA’s statistics agency is currently surveying farmers for the highly anticipated March 31 planting intentions report, so present market conditions are influencing responses. The survey period lasts until mid-March, and almost 79,000 farm operators were surveyed for last year’s report. Karen Braun is a market analyst for Reuters, and views expressed above are her own.
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