FOCUS ON AG
March 14, 2022
MARCH WASDE REPORT IS FIRST SINCE UKRAINE INVASION
The monthly USDA World Supply and Demand Estimates (WASDE) report released on March 9 was the first WASDE Report issued since the Russian invasion of Ukraine in late February. Many farmers and grain traders were wondering how USDA would weave the Russia/Ukraine situation into the WASDE report, given the uncertainty surrounding the ongoing situation in Eastern Europe. It does appear that some of the events in Ukraine have been considered in the March 9th report; however, it should be noted that the WASDE report was based on conditions as of March 1st and the situation has changed considerably since that time.
CORN
The latest WASDE report continued to show an increase in the total 2021 U.S. corn production, which is estimated at just over 15.1 billion bushels, representing an increase of approximately 1 billion bushels from 2020 corn production levels. The latest USDA report also showed that the total demand for corn usage in 2021-22 at just over 14.9 billion bushels, which was increased by 100 million bushels from the February WASDE report and is slightly above the 2020-21 usage levels. Corn export levels are projected to decrease by 253 million bushels in 2021-22; however, this estimate may be revised in future months due to the grain trade disruptions in Russia and Ukraine. USDA estimated the total corn used for ethanol production in 2021-22 at 5.35 billion bushels and the total corn used for livestock feed at 5.65 billion bushels.
USDA is now estimating 2021-2022 U.S. corn ending stocks at 1.44 billion bushels, which is a decrease of 100 million bushels from the February WASDE report. Again, the corn ending stocks number could be quite fluid in the coming months, depending on developments in the Russia/Ukraine situation and how that impacts worldwide grain trade. The 2021-22 stocks-to-use ratio is estimated at 9.8 percent, compared to a projection of 8.3 percent a year ago in March. However, the current stocks-to-use ratio remains quite tight compared to recent corn stocks-to-use ratios of 13.7 percent for 2019-20, 14.6 percent for 2018-19, and 14.5 percent in 2017-18. This means that there continues to be potential for short-term rallies in the cash corn market in the coming months, especially in areas of the U.S. with tight supplies and high local corn demand.
tly estimating the U.S average on-farm cash corn price for 2021-2022 at $5.65 per bushel, which was increased by $.20 per bushel from the February estimate. The projected 2021-22 market year average (MYA) corn price represents the highest estimated WASDE corn price since the 2013-14 marketing year. The current projected 2021-22 average price of $5.65 per bushel compares to national average corn prices of $4.53 per bushel in 2020-21, $3.57 per bushel for 2019-20, $3.61 per bushel for 2018-19, and $3.36 per bushel for both 2017-18 and 2016-17. The 2021-22 WASDE price estimates are the expected average farm-level prices for corn and soybeans for the 2021 crop from September 1, 2021 through August 31, 2022; however, they do not represent estimated prices for either the 2020 or 2021 calendar year.
SOYBEANS
The latest NASS report kept the final 2021 U.S. average soybean yield at 51.4 bushels per acre, which is just slightly above the final U.S. average yield of 51.0 bushels per acre in 2020. Total U.S. soybean production for 2021 is still estimated at 4.435 billion bushels, which is increase of 219 million bushels from final 2020 production levels. The recent WASDE report estimates total soybean demand at 4.422 billion bushels for the 2021-22 marketing year, which represented an increase of 40 million bushels from the February demand figure but is a decline of 82 million bushels from 2020-21 soybean demand levels. Soybean crush levels are expected to increase by nearly 75 million bushels in the current marketing year; however, soybean export levels are expected to decline by 171 million bushels during 2021-22.
The U.S. soybean ending stocks for the 2021-22 marketing year in the latest WASDE Report are estimated at 285 million bushels, which was a decrease of 40 million bushels from the February WASDE report. The projected soybean ending stocks for the current year would be a slight increase from the 2020-21 carryout level of 257 million bushels; however, the 2021-22 ending stocks would be among the lowest in past decade. The projected 2020-21 soybean ending stocks compare to recent year-end carryout levels of 525 million bushels for 2019-20, 913 million bushels for 2018-19, 438 million bushels for 2017-18 and 302 million bushels in 2016-17.
The soybean stocks-to-use ratio for 2021-22 is now estimated at only 6.4 percent, which is just above the ratio of 5.7 percent in 2020-21 and is well-above the lowest stocks-to-use level in recent times at 2.6 percent in 2013. However, the projected 2021-22 ratio is considerably lower than other recent soybean stocks-to-use ratios of 23 percent for 2018-19 and 13.3 percent for 2019-20. The expected rather tight soybean supply may offer some opportunities for continued strong cash soybean prices in the coming months, especially if the projected lower production levels in South America become reality.
USDA is now projecting the U.S. average farm-level soybean price for the 2021-2022 marketing year at $13.25 per bushel, which was an increase of $.25 per bushel from the February estimate. The estimated 2021-22 U.S. MYA soybean price would be the highest since the 2013-14 marketing year. The 2021-22 soybean price estimate of $13.25 per bushel compares to other recent yearly average soybean prices of $10.80 per bushel in 2020-21, $8.57 per bushel for 2019-20, $8.48 per bushel for 2018-19, and $9.35 per bushel for 2017-18.
WHEAT
All eyes were on the wheat data in the latest WASDE report, as Ukraine and Russia account for nearly 30 percent of global wheat exports. In addition, now is the time of the year when farmers in Eastern Europe would typically be applying supplemental nitrogen fertilizer to the 2022 winter wheat crop in order to maximize yields. The ongoing invasion of Ukraine is likely to reduce wheat production levels in Eastern Europe and could also lead to harvest challenges for the 2022 wheat crop. Initially after the Russian invasion of Ukraine, wheat futures were up the limit for several days in a row, with the nearby futures price increasing to near record levels by the first week of March; however, wheat futures prices did moderate and decline somewhat during the second week of March. Some local grain markets discontinued offering forward contract cash bids on wheat for a few days due to the extreme volatility in the wheat futures market.
The March 9 WASDE report estimated the total 2021-22 wheat supply at just over 2.58 billion bushels, which compares to over 2.95 billion bushels a year ago. The total projected wheat usage for 2021-22 is just over 1.93 billion bushels, which was down slightly from 2.11 billion bushels in 2020-21. The WASDE report estimated the wheat ending stocks for 2021-22 at 653 million bushels, compared to 845 million bushels in 2020-21. The March USDA report increased the 2021-22 farm-level average wheat price by $.20 per bushel from the February price. The MYA price estimate for wheat now stands at $7.50 per bushel, which compares to the 2020-21 final price of $5.05 per bushel, and other recent MYA prices of $4.58 per bushel in 2019-20. $5.16 per bushel in 2018-19, and $4.72 per bushel in 2017-18. The MYA price for wheat and other small grains is the average farm-level price in the U.S. from June 1 until May 31 each year.
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Note — For additional information contact Kent Thiesse, Farm Management Analyst and Sr. Vice President, MinnStar Bank, Lake Crystal, MN. (Phone — (507) 381-7960) E-mail — kent.thiesse@minnstarbank.com) Web Site — http://www.minnstarbank.com/