Ag Chatter: Deciphering the Grain Market Report
As another year ends, it’s a good time to pause and reflect on the year just passed and consider what was in and out of your control, especially since it was such a volatile year in the markets.
The theme that underscored several of the market movements again this year was the pandemic. It created a major supply and demand squeeze, which spurred both constraints and opportunities for global importers. There were some big rallies before harvest and a demand recovery later in the year that offered farmers some winning price opportunities.
For more on what impacted market prices this year and how farmers are generally positioned for 2022, Jacqueline Holland, grain market analyst from Farm Futures, covers it all on In the Driver’s Seat this month.
Holland grew up on a dairy farm in northern Illinois, earned a B.S. in Finance and Agribusiness from Illinois State University and an M.S. in Agricultural Economics from Purdue University, where she focused on large farm decision-making and precision crop technology research. Today, she leads the grain market analysis and economic commentary for Farm Futures.
Below is insight from Holland on key issues that impacted U.S. grain and oilseed markets this past year:
Market Supply and Demand
Headlines during the first half of the year called out tight soybean and corn stocks. Soybean exports to China were significant due to their tight supplies, resulting in high prices across the industry. Shipping delays for the Brazilian crop also enabled American soybean farmers to capitalize on the demand from China.
Looking ahead, Holland expects soy exports to China to lag slightly in 2022 compared to this year’s pace. She says, “Prices will remain high, but the shipping delays that we saw due to Hurricane Ida and Brazil’s crop looks to be back on track this year. That indicates that soy exports are likely to be strong again this year, but maybe not the volumes that we saw last year.”
While 2021 U.S. production of soybeans ended up better than earlier expectations, supplies are still tight and there continues to be a major focus on increasing global soybean production levels, according to the December 2021 World Agricultural Supply and Demand (WASDE) report.
As for corn, China set new records for corn purchases this year and the country is expected to buy even more next year. Demand for corn remained strong both at the domestic and international levels as well.
China’s increasing import demand reflects many variables, including its scarcity of land resources, changing of dietary ingredient preferences, rising living standards and a greater openness to global trade agreements. China has become a net importer of grain, but its grain imports are modest in comparison with its oilseed imports. China has also swung from a net exporter to net importer of corn.
Global weather volatility, including severe drought and heat across the western and northern U.S. Plains, and Hurricane Ida’s destruction in coastal areas, greatly impacted the U.S. growing season. As the population continues to increase, the need to harvest more crops, along with the risk of severe weather patterns impeding crop development, play a role in the push for global acreage expansion. Holland says, “57 million acres of row crop production have come online over the last two years, but that hasn’t always been a guarantee that we are going to get good crops.”
Rising Input Costs
Another worrisome factor for many farmers has been the steady increase in input costs. According to a new poll by Purdue University, more than half of America’s largest farmers expect input prices to increase by 12% due to inflation. The latest government report put the consumer inflation rate at 6.8%, the highest rate since 1982.
Still a Positive Outlook
Despite so much volatility, Holland says, “Farmers have come out on top of it all.” She wrote about a recent USDA report that updated the farm financial forecast to show that net farm income was up 23% annually, due to higher commodity prices.
Tri-Annual Farmer Survey
Holland and her team field a tri-annual farmer survey to track annual production and forecast future acreage. The results are well-regarded in the marketplace and available to farmers who want to make proactive marketing decisions.
The most recent data available is from the outlet’s August survey that estimated in 2022, U.S. farmers will plant 94 million acres of corn, nearly 91 million acres of soybeans, 35 million acres of winter wheat, 14 million acres of spring wheat, totaling all these crops at 234.8 million acres. That was a 3% estimated increase in acres from 2021 for the coming year.
For the current survey in the field, Holland doesn’t expect corn and soybean acres to be as high as they were forecasted last summer. She says the new-crop price ratio is favorable for corn acres over soybeans. She notes there’s more competition from alternate crops, including wheat and cotton, which is going to be a larger factor in the corn and soybean acreage discussion.
Farm Futures will publish its next round of survey findings in January.
For more market-moving insights from Jacqueline Holland, listen to our latest podcast episode and check out her daily and weekly articles at https://www.farmprogress.com/farm-futures. If you have questions about marketing your grain or want to discuss which grain contracts may be a good fit for you, reach out to your local ADM representative.
ADM is providing this communication for informational purposes, and it is not a solicitation or offer to purchase or sell commodities. The recommendations in this communication do not take into account any particular individual’s or company’s objectives or needs, which should be considered before engaging in any commodity transactions based on these recommendations. The sources for the information and recommendations in this communication are believed to be reliable, but ADM does not warrant or guarantee the accuracy of the information or recommendations. ADM or its affiliates may hold or take positions for their own accounts that are different from the positions recommended in this communication. The information and recommendations in this communication are subject to change without notice.