UPDATED – February 19, 2021 – 1505 CST – The chief economist of the U.S. Department of Agriculture is forecasting the good times will keep rolling for grain farmers in 2021-22.
“We expect grain and oilseed prices to remain at these higher levels reflecting tight global supplies and strong international demand,” Seth Meyer said in his prepared remarks for the USDA’s 2021 Agricultural Outlook Forum.
The caveat is that above trend yields in the United States or Brazil, a prolonged decline in global economic growth or a reduction in Chinese demand could pull prices down.
Corn and soybean stocks-to-use ratios are the lowest since 2013-14 and there is no reduction in demand forecast from China or other major importers.
“With a tightening stocks-to-use ratio, increased price volatility is likely as fundamentals are revealed,” he said.
Soybean prices are forecast to “remain elevated” due to Chinese buying as well as strong U.S. demand from the livestock sector and the growth in renewable diesel capacity in that country.
Justin Choe, agricultural economist with the USDA’s Office of the Chief Economist, delved a little deeper into the cereal and oilseed supply and demand dynamics.
He expects the 2021-22 soybean season average farm cash price to be $11.25 per bushel, up slightly from this year’s average of $11.15.
In contrast, corn prices are forecast to decline slightly because of increased U.S. acres and an expected return to trend yields leading to higher ending stocks for the crop.
Strong global demand will moderate the corn price drop. An expected rebound in gasoline and ethanol consumption will further support the market, with corn use for ethanol rising five percent.
Choe is forecasting an average corn price of $4.20 per bu., down from $4.30 in the current crop year. That has a lot to do with recovering production in competing countries.
Wheat is expected to experience the biggest price gains with a seasonal average farm price of $5.50 per bu., up from $5.00 this year.
Choe said that is because U.S. wheat ending stocks are forecast to fall to 698 million bushels, down from 836 million bushels in 2020-21.
The USDA is forecasting 92 million acres of U.S. corn this spring, a one million acre increase over 2020 plantings. Soybean acres are expected to jump to 90 million acres, a 6.9 million acre increase.
Choe said the corn/soybean price ratio is 2.6. Whenever that ratio is over 2.5 it favours soybeans.
The USDA is forecasting 45 million acres of wheat, including 32 million acres of winter wheat that is already in the ground, a five percent increase over last year.
“This is the first increase in winter wheat acreage since 2013-14,” he said.
The extra corn and soybean acres are expected to largely come from a reduction in prevented plantings or idled acres, which have been way higher than normal the past two years.
They will also come from lower expected spring wheat and durum plantings in the Northern Plains and smaller cotton acres.
U.S. net farm income in 2021 is forecast to fall eight percent to US$111.4 billion, but that would still be 21 percent above the 2000-19 average of $92.1 billion.
Cash receipts for both crops and livestock are forecast to increase by $20.4 billion. But direct government farm payments are expected to drop by $21 billion due to smaller supplemental and ad hoc disaster assistance for COVID-19 relief.
Expenses are expected to rise by $8.6 billion led by higher spending on feed, fertilizer and labour.
The USDA’s long-run projection anticipates world demand for beef, pork and poultry combined will increase by more than 17 percent through 2030.
That will support an increase in world corn trade of 22.5 percent and soybean trade of 26.7 percent over that same timeframe.
China will account for 79 percent of the projected increase in soybean imports. Brazil will supply 70 percent of that additional demand.
Global soybean oil imports will rise 13.1 percent over that same period, driven by demand from India.