Tightening Stocks Will Spark the First Acreage Battle in Years

Posted on Thu, 11/19/2020 - 16:03

The fundamental makeup of the markets has dramatically shifted to bullish in just a couple months. With robust demand shrinking soybean and corn ending stocks, a real acreage battle will occur until spring, as both markets need to “buy” acres for next year. Note: Our combined corn and soybean planted acres for 2021 would be record-large — by a wide margin. The balance sheets below show our outlooks for 2020-21 and an early look at the 2021-22 marketing year. 

Corn

We expect USDA to further lower the 2020 corn crop in January, though a slightly bigger import forecast would offset some of that cut. On the demand side of the 2020-21 balance sheet, we expect exports to top USDA’s projection by 50 million bu., driven by strong shipments to China as it covers domestic shortfalls and rebuilds state stockpiles. 

For 2021-22, we anticipate corn plantings will rise 2 million acres from this year. With a trendline yield, total supplies would rise about 500 million bushels. We project use would increase a little more than half of the jump in supplies, resulting in rising ending stocks, though remain below 2 billion bushels. 

corn balance

Soybeans

Similar to corn, we expect USDA’s 2020 soybean crop estimate to decline slightly. On the demand side of the old-crop balance sheet, we feel USDA is underestimating 2020-21 exports, though some of that will be accounted for with lower crush and residual “use.” Still, we project ending stocks and stocks-to-use at levels that would support a higher cash price. 

We expect next year’s soybean plantings to surge nearly 7 million acres. But given the sharply lower beginning stocks, total supplies would only rise slightly from this year. The higher prices this year and bigger Brazilian supplies should slow exports and total use will drop slightly in the new-crop marketing year. Though we project new-crop ending stocks will rise, they will remain tight enough to support a price above $10.00.

soybean balance

Wheat

Even though global supplies are ample, we expect increased export business for U.S. wheat in the second half of the 2020-21 marketing year as Black Sea shipments slow. We also have slightly larger food use and feed/residual use built into our old-crop balance sheet than USDA.


For the 2020-21 marketing year, we expect wheat plantings will rise 2.2 million acres, though poor HRW conditions are likely to pull the yield down slightly. But smaller beginning stocks would offset the expected rise in production to reduce total supplies. 

With wheat prices on the rise and expectations of smaller supplies, we project total use to decline around 50 million bushels. That would tighten ending stocks, but stocks-to-use would inch higher, though not enough to keep prices from strengthening. 

wheat balance