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Corn, soybean yield estimates increase

Corn, soybean yield estimates increase

The monthly World Agricultural Supply and Demand Estimates, released Sept. 10 by the U.S. Department of Agriculture’s Office of the Chief Economist, increased corn supply for the start of the new marketing year, largely driven by the 600,000 additional acres farmers planted. The USDA dropped the soybean supply due to a 400,000-acre decrease in soybeans planted but bumped up the cotton supply despite a 530,000-acre decrease. Yield expectations for corn and soybeans were increased by 1 percent, while cotton yield expectations increased by 12 percent compared to the previous month’s report. Wheat yields remain unchanged compared to the previous month.

Figure 1 is historic yields for corn, soybeans, wheat and cotton since 1973 with 2021 estimates highlighted.

Corn

For the close of the 2020-2021 corn marketing year, a decrease of 40 million bushels in ethanol use and a decrease of 30 million bushels in corn exports pushed the USDA’s ending stocks estimate 6 percent higher to 1.18 billion bushels from the August estimate of 1.11 billion bushels.

The USDA estimates the 2020-2021 marketing-year price to be $4.45 per bushel, up 5 cents compared to August and up 25 percent compared to 2019. The stocks-to-use ratio of 7.9 percent is cut nearly half from where it was in 2019 and is the lowest stocks-to-use ratio since 2012.

For the new 2021-2022 corn marketing year that started Sept. 1, the USDA indicates that corn farmers planted 600,000 more acres of corn than what was reported in the June 30 Acreage report, moving corn area planted to 93.3 million acres, up 2.8 percent compared to 2020. This estimate, in conjunction with an increase in yield from 174.6 bushels per acre reported in the August Crop Production Survey report to 176.3 bushels per acre – a 2.5 percent increase compared to 2020 – increases corn production for the year from 14.75 billion bushels to almost 15 billion bushels. This is about where the USDA anticipated production to be when estimates were first reported in May of this year and is 5.7 percent higher than corn production in 2020. With the corn carry-over quantity increased as well, the USDA reported corn supply to be 16.2 billion bushels, up less than 1 percent compared to 2020.

For corn demand, the USDA increased the feed and residual-use category by 75 million bushels, from 5.625 billion bushels to 5.7 billion bushels, down less than 1 percent compared to 2020. The USDA increased corn exports by 3 percent, from 2.4 billion bushels to 2.475 billion bushels, which is just less than 10 percent under 2020 levels. The 2021-2022 ethanol use is on track for a 3.3 percent increase at 5.2 billion bushels, compared to 2020-2021 when ethanol use was only at 5 billion bushels.

Adjustments made to supply and demand this month caused ending stocks to rise 166 million bushels, from 1.24 billion bushels to 1.4 billion bushels, up 18 percent compared to 2020 ending stocks. This also pressured the 2021-2022 marketing-year average farm price for corn to decrease from $5.75 per bushel last month to $5.45 per bushel – a full $1 per bushel above the corn price in the 2020-2021 marketing year.

Figure 2 shows the corn stocks-to-use ratio and corresponding price since 2010.

Soybeans

At the close of the 2020-2021 marketing year, the USDA lowered soybean crushing by 15 million bushels to 2.14 billion bushels and lowered export estimates for soybeans by 10 million bushels to 2.26 billion bushels. The adjustments made in demand also increased ending stocks from 160 million bushels the previous month to 175 million bushels in September.

The stocks-to-use ration increased from 3.5 percent to 3.9 percent. However the average farm price for soybeans in the 2020-2021 marketing year remained at $10.90 per bushel, a 27 percent increase in soybean price compared to 2019.

The new soybean marketing year for 2021-2022 started Sept. 1. The USDA estimates indicate soybean farmers decreased planted acres by 400,000 acres compared to the June Acreage report. This means that soybean planted area moved from 87.6 million acres to 87.2 million acres, which is just under a 5 percent increase compared to 2020 planted acreage.

The USDA made a slight yield bump, returning soybean yields to 50.6 bushels per acre compared to the 50 bushels per acre reported last month in the August Crop Production Survey. That’s a bit less than early estimates in May that soybean yields would be 50.8 bushels per acre. Soybean yields at this level are tied for highest on record with 2018, when 50.6 bushels per acre was the final recorded yield for the year. The yield bump also helps offset the decrease in soybean acres planted, resulting in a soybean-production estimate of 4.3 billion bushels, up 5.8 percent compared to 2020. However given the lowest carry-over soybean-stocks quantity since 2013, soybean supply for 2021 is on track to only reach 4.5 billion bushels, about 2.3 percent lower than 2020.

Soybean demand estimates for 2021 were revised in September compared to August as the USDA lowered soybean crushing use by 25 million bushels to 2.18 billion bushels, which is still almost 2 percent higher than 2020 crushing. But the USDA increased soybean exports by 35 million bushels from 2.05 billion bushels to 2.09 billion bushels.

However soybean exports are on track to be about 7.5 percent behind the 2020 record-breaking 2.26 billion bushels. Adjustments made to supply and demand in this month’s report pushed ending stocks from 155 million bushels to 185 million bushels, which is 5.7 percent higher than ending stocks reported for 2020. The 2021-2022 marketing-year average price for soybeans is running at $12.90 per bushel, down 80 cents or 6 percent compared to last month, but running a full $2 per bushel above the 2020-2021 marketing-year average price.

Figure 3 shows the soybean stocks-to-use ratio and corresponding price since 2010.

Wheat

The USDA has kept wheat planted acreage consistent across the 2021-2022 marketing year at 46.7 million acres, about 5 percent more than the number of acres of wheat planted in 2020. Yields this month remained unchanged compared to the August estimates at 44.5 bushels per acre. This is slightly lower than estimates from earlier in the year when 50 bushels per acre were expected, likely impacted by drought-stricken areas, and about 10 percent behind where yields for wheat sat in 2020 when farmers were reporting 49.7 bushels per acre.

Wheat production in 2021 is estimated by the USDA to be just under 1.7 billion bushels, about 7 percent behind production in 2020 when wheat production reached above 1.8 billion bushels. The only revision made by the USDA this month was to lower wheat imports from 145 million bushels to 135 million bushels, which is about 35 percent above the 100 million bushels of imported wheat that occurred in 2020, but matches 2018 imports. The USDA estimates total U.S. wheat supply to be at 2.6 billion bushels in 2021, which is 9 percent behind the 2020 wheat supply of 2.9 billion bushels and 14 percent behind the 2019 wheat supply of 3.1 billion bushels.

On the demand side for 2021-2022 marketing-year wheat, food use for wheat is matching 2020 and 2019 levels of close to 964 million bushels. Seed use is in line with 2019 and 2020 levels as well, almost 62 million bushels. Wheat exports from the United States are running about 12 percent behind 2020 levels, with only 875 million bushels expected to be exported in the 2021-2022 marketing year compared to 992 million bushels exported in the 2020-2021 marketing year. That’s likely an impact from the increase in feed use.

USDA estimates show wheat used for feed has jumped 65 percent from the 2020-2021 marketing year, when feed use was 97 million bushels, to the 160 million bushels for feed use in the 2021-2022 marketing year. Evidence of the shift in feed use is in the ending stocks estimate, which the USDA puts at 615 million bushels – 27 percent lower than in 2020 when ending stocks for wheat were 844 million bushels.

The stocks-to-use ratio for wheat in 2021-2022 currently sits at 30 percent, which is 10 percent lower than in 2020-2021. The USDA estimates the average farm price for wheat in 2021-2022 is $6.60 per bushel, up 10 cents from initial estimates for the marketing year early this spring and up $1.55 per bushel compared to 2020.

Figure 4 shows the wheat stocks-to-use ratio and corresponding price since 2010.

Cotton

The 2021-2022 marketing year for cotton began Aug. 1 and the yield increase reflected in the September World Agricultural Supply and Demand Estimates indicates significant weather improvements. On the supply side the USDA revised cotton area planted down from 11.72 million acres in August to 11.19 million acres, which is down almost 7.5 percent compared to the 12.09 million acres planted in 2020.

With the revised 2021-2022 yield bump from 800 pounds per acre in August to 895 pounds per acre, which is 5 percent higher than yields in 2020, the USDA estimates cotton production to reach 18.5 million 480-pound bales, an increase of 26.7 percent compared to 2020 when production only reached 14.6 million 480-pound bales, and up from last month’s estimate by 7.24 percent. With the carry-over stocks of 3.15 million 480-pound bales, the lowest since 2013, cotton supply in 2021-2022 is on track to reach 21.66 million 460-pound bales, which is about 1 percent below total supply in 2020.

On the demand side for cotton, domestic use remained unchanged from August at 2.5 million 480-pound bales, an increase of 6 percent compared to 2020. However, estimates for cotton exports increased by 500,000 480-pound bales from August to September, now registering 15.5 million 480-pound bales, which is still pacing about 5 percent behind exports in 2020 when 16.37 million 480-pound bales were exported.

The adjustments made in supply and demand pressured ending stocks upward from 3 million 480-pound bales in August to 3.7 million 480-pound bales, which is 17 percent higher than in 2020. The stocks-to use ratio for the 2021-2022 marketing year sits at 20.5 percent, up just under 4 percent compared to 2020. However, the average farm price for cotton increased 4 cents from August to September and now sits at 84 cents per pound, up 26 percent from prices received in the 2020-2021 marketing year.

Figure 5 shows the cotton stocks-to-use ratio and corresponding price since 2010.

Summary

In its September World Agricultural Supply and Demand Estimates, the USDA applied its objective yield plot results to crop-production estimates, resulting in increased yield estimates for corn, soybeans and cotton for the 2021-2022 marketing year, while leaving wheat unchanged. Additionally, corn and soybean production are both up just over 5 percent compared to 2020 production levels, while cotton production is up almost 27 percent compared to 2020. But wheat production is down 7 percent compared to 2020.

The resulting supply changes loosen what have been consistently tight margins throughout the year as demand-side categories for all four commodities also saw slight bumps. Ending stocks for corn, soybeans and cotton all slightly increased in September estimates compared to August, thus relieving the high pressure on prices. What might come as a surprise to many is the increase in yields, especially compared to last month when farmer-survey results indicated lower yields for these commodities, and particularly as it relates to drought-stricken areas. Loosened margins, however, may put a pause on rising commodity prices that have been occurring throughout the year.

Shelby Myers is an economist with the American Farm Bureau Federation’s Market Intel. Visit www.fb.org/market-intel for more information.

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