Play Turner’s Take Ag Marketing Podcast Episode 296
If you are having trouble listening to the podcast, please click here for Turner’s Take Podcast episodes!
In this podcast we go over US new crop acreage estimates and what it could mean for corn, soybean and wheat prices in 2022. Based on our work it seems like there is not enough US acres to go around. Without trendline yields or better, 2022 might bring another marketing year of tight ending stocks and elevated prices. Make sure you take a listen to this week’s Turner’s Take Podcast!
If you are not a subscriber to Turner’s Take Newsletter then text the message TURNER to number 33-777 to try it out for free! You may also click here to register for Turner’s Take.
Corn and soybean acres tend to max out around 180mm in the US. We currently have new crop corn at 91mm acres which leaves 89mm for soybeans. Some may say the corn number is too low but with high input costs and high prices of other commodities, we think acres will be lower for corn outside the main corn belt.
Below is a chart of major corn exporter stock/usage ratios going back twenty year. According to the Jan USDA global exporter are at 8.5% stock/usage. The lows in 2011 and 2020 were 7%. When production losses in S. America are all account for we could be back at that 7% low again for 2022.
At 91mm acres and a trend line 180 yield (which would be a record by 3 bpa), US production just barely keeps up with demand. Ethanol use is ahead of USDA pace needed to meet WASDE expectations. The USDA will most likely have to raise ethanol use by 50 to 100mm bushels. Production losses in S. America could shift 100 to 200mm bushels in exports back to the US. The point is ending stocks are probably closer to 1.2 to 1.3 billion instead of 1.5 billion. Also note that at 91mm acres and a record 180 bpa ending stocks do not change year over year.
I like buying call spread and selling put spreads in July for spec and farmer re-ownership. For farmers looking to sell new crop during the growing season I think some courage calls to sell into make a lot of sense too. Call me and we can figure out the best strategy for your account.
Soybeans at 89mm and a national 51 bpa keeps US production equal to total demand. Major exporters have tight stock to usage on par with the 2011 lows. Soybean production losses in S. America could lead to the tightest stock/usage ratios for major exporters in the past 20 years.
While soybeans are charging higher, canola and EU rapeseed are trading at $18 and $19 per bushel respectively. The market is aggressively price rationing canola and rapeseed and encouraging consumers to substitute soybeans for oilseed products. As the marketing year goes on we could see more soybean demand come from traditional canola/rapeseed buyers.
The USDA has old crop soybean carryout at 350 but since the Jan WASDE S. American produciton estimates have come down another 5-6 MMT. Another 100 to 125mm bushels of export demand could come back to the US. That could put ending stocks closer to 225 to 250mm bushels. Keep in mind at 89mm acres and a 51 yield new crop ending stocks don’t change year-over-year. Some will argue 89mm is too high if corn is at 92 or 93mm acres. There is just not enough acres to go around this year.
.Major wheat exporter stock/usage is as tight as it was back in 2007 when we had $20 wheat!
At 48mm acres for All Wheat and a healty 49 bpa yield, ending stocks are the same year-over-year. That could be a tall order considering the drought we are seeing in HRW country. Some may say 48mm acres are too high, but anything less sends stocks lower even with a trend line yield or higher. Winter wheat needs to stay above $7 and spring wheat above $9 to attract sufficient acres.
There is not enough acres to go around to make sure every major grain and oilseed market is adequately supplied next marketing year without trend line yields or higher across the board. This sets up for a volatile planting and growing season. Based on our work the bias is to the upside with the potential for extreme price swings if weather markets develop.
About Turner’s Take Podcast and Newsletter
If you are having trouble listening to the podcast, please click here for Turner’s Take Podcast episodes! Craig Turner – Commodity Futures Broker 312-706-7610 email@example.com Turner’s Take Ag Marketing: https://www.turnerstakeag.com Turner’s Take Spec: https://www.turnerstake.com Twitter: @Turners_Take Contact Craig Turner