Strong demand expected to push corn, soybean prices

Analyst argues tighter stocks will help prices keep ahead of increased acreage and yields in the United States next year

Scott Irwin has a beautiful Christmas gift for grain farmers.

It’s the year 2021 wrapped in bullish projections that won’t be easy to tear off.

The noted University of Illinois market analyst sees “very strong corn and soybean prices in 2021,” he said during the Illinois Farm Economics Summit Dec. 2.

Irwin sees plenty of demand that will continue to support prices into 2021-22, and little chance for supplies to catch up from today’s thinning stocks.

While the United States Department of Agriculture has projected 2021 soybean prices of US$10.40 per bushel, he’s forecasting $10.80 to $10.90 as more likely.

“I think the evidence is that we’re going to end up with a higher price than the USDA is currently carrying,” he said.

While most western Canadian farmers don’t grow corn or soybeans, those are the two most important price-trendsetting commodities in the grains complex, with oilseeds being driven by soybeans and feedgrains pulled along by corn.

Irwin thinks the present tightening of stocks around the world, which has especially affected U.S. soybeans, will withstand millions of extra harvested acres in 2021 in the U.S., as well as better yields of both corn and soybeans.

Both higher acreage and better yields of the big crops are likely because 2020 saw millions of acres lost to early-season weather problems in the U.S. Midwest, as well as crippling drought conditions in the same area in the second half of the season.

Irwin thinks seeded acreage in the U.S. will increase by about two million acres this spring to produce about eight million more harvested acres in 2021-22.

Corn and soybean acres should be almost equal because the corn-soybean ratio is pushing farmers to grow more beans if they can.

“We have really strong incentives for planting more soybeans,” said Irwin.

“The market is screaming, basically, that we need more soybean acres.”

In 2016-17, U.S. farmers faced about the same corn-soybean ratio, and they ended up planting an extra seven million soybean acres that year.

The stunning grain market rally that ignited in late summer was driven by weather problems in key growing areas like the Midwest, plus stronger than expected demand and exports. That has drawn down the stocks of many crops, with U.S. soybeans at very tight levels.

The strong la Nina in South America is creating dryness already and could significantly affect that continent’s soybean crop, removing much of the supply base China has relied upon in recent years.

China, fortunately for agricultural commodity producers, has survived the impact of the pandemic and its economy is already growing again. Next year, its growth should grow even more and as it rebuilds its hog herd post-African swine fever, its need for soybean imports should continue.

Its need for corn imports will probably also continue, even though the status of Chinese corn supplies is always a mystery, said Joe Janzen, also of the University of Illinois.

“China’s importing a lot of corn,” said Janzen.

Irwin said the present world situation of corn and soybean stocks means U.S. farmers are in a good situation to take advantage of strong demand and production challenges elsewhere. It also means another year of bad weather in the U.S. Midwest would scare markets further.

“We can’t have anything go wrong with the U.S. crop in 2021, given the size of the demand base, and rebuild stocks very much.”

All in all, it creates a market in which the upside potential outweighs the downside as long as stocks remain tight.

“The downside risk to corn and soybean prices, until we get that big average next year, and big crops in 2021, is not really large,” said Irwin.

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