Corn and Soybean Outlook
USDA has released its May World Agricultural Supply and Demand Estimates (WASDE) report. This is the first report that considers a mix of old and new crop estimates. The report reflects crop estimates affected by drought, war in Eastern Europe and the planting season underway in the United States.
Dryer and warmer conditions for the week of May 8 are helping U.S. producers catch up after a slow start to the planting season, especially for corn. However, as is the case every year with the May WASDE, new crop estimates should be taken lightly as USDA’s acreage report comes out in June and weather will certainly be an important variable throughout the summer. In fact, the National Weather Service forecasts above-normal temperatures and below-normal precipitation in much of the Western Corn Belt and Plains states through July.
Lower corn production, domestic use, exports and ending stock. Higher prices.
USDA left ending stocks for old U.S. corn crop (2021/22) unchanged at 1.44 billion bushels. New crop (2022/23) ending stocks are projected lower at 1.36 billion bushels. This is based on the expectation that U.S. producers will plant fewer corn acres due to high fertilizer prices, with 2022 production falling 4.3% below last year’s total. As of today, corn stocks are projected to remain relatively tight, with the current year’s stock-to-use at 9.6% and the 2022/23 stocks-to-use projected at 9.3%. Both levels would be below the 10-year average of 11.9%.
On the demand side, USDA projects corn exports will drop 100 million bushels compared to the 2021/22 marketing year. This is largely due to lower supplies and robust overall domestic demand. Within the ethanol sector, corn use is expected to remain flat as U.S. drivers reduce their consumption due to high-price gasoline. Feed and residual use is projected to decline about 5% because of higher corn prices, a smaller crop, and a decline in grain-consuming livestock.
While exports are expected to be down from last marketing year, demand for U.S. corn likely will be high as the global market looks to fill supply gaps. Drought continues to impact South American yields, and war could cut Ukraine’s corn production down to 19.5 million metric tons. Over the past five years, Ukrainian corn exports have represented 15% of the world total. With the war in Eastern Europe, USDA projects Ukrainian corn exports to only represent 5% of the world export market share if realized.
Based on current forecasts, USDA projects producers will receive a season-average corn price of $6.75 per bushel. This price would be $0.85 higher than a year ago and the highest since the 2012/13 marketing year.
Higher soybean supplies, crush, exports and stocks. Higher prices.
Markets already penciled in lower ending stocks for old U.S. soybeans, largely due to a historically strong U.S. crush and export demand. The WASDE report lowers old crop ending stocks to 235 million bushels, down from 260 million. If realized, this would be the lowest ending stock level since 2015/16. Furthermore, the world stocks-to-use ratio for 2021/22 is at 23.5%, roughly 5 percentage points lower than the 5-year average.
The outlook for new crop projects higher supplies based on the expectation of a record 91 million acres of soybeans and the potential for a record harvest of 4.64 billion bushels. However, USDA’s June Acreage Report will provide a clearer picture of actual acres planted to soybeans for the 2022 crop.
On the demand side, USDA projects a record 2.255 billion bushels of soybeans used for crush and a second-highest 2.2 billion bushels for exports. As a result, USDA projects record domestic demand for U.S. soybeans in 2022/23 at 4.58 billion bushels. Even with the potential historic high in soybean production driven by plantings, demand will keep its momentum with USDA projecting a 6.8% stocks-to-use ratio for 2022/23, which would still be below the 10-year average of 8.2%.
USDA forecasts season-average price of $14.40 per bushel for 2022/23 soybeans. This is up $1.15 compared to last year. Soybean meal prices are forecast at $400 per short ton, down $20 from 2021/22. Soybean oil prices are forecast to average $0.70 per pound, down $0.05. per short ton due to a projected rebound in oilseed and product supplies in foreign markets.