USDA Reports Reveal Zero Margin for Error for Corn, Soybean Production

The price rally that started in the fall of 2020 definitely attracted more corn acres in 2021. That was confirmed in USDA’s June Acreage report.

USDA reports 92.7 million acres of corn in 2021, which is up 2% or 1.87 million acres from 2020. USDA pegs the 2021 soybean crop at 87.6 million acres, which up 5% from 2020.

Combined corn and soybean acres of 180.2 million acres is almost equivalent to the record set in 2017, says Ben Brown, University of Missouri Extension economist with the Food & Agricultural Policy Research Institute (FAPRI).

“That’s not a surprise given the prices we’ve seen and the favorable weather for planting progress,” he says.

Ahead of the USDA report, analysts surveyed by Reuters expected corn plantings to rise notably from March intentions to around 93.787 million acres with soybean plantings climbing to 88.955 million acres.

Corn and soybean prices surged after the reports were released. In fact, Brown notes, new-crop soybean prices traded a $1.17 range on June 30.

“The market wasted little time in reacting,” says Bryan Doherty, Total Farm Marketing, senior market advisor.

Doherty says the Acreage and quarterly Grain Stocks reports should be a wakeup call for end users.

“If we see price pullbacks, expect farmer selling is going to be minimal,” he says. “End users should be looking at ways to secure inventory. Things are going to get really tight now.”

Arlan Suderman, StoneX chief commodities economist, agrees.

“There is zero margin for error right now in stocks and with the crop that’s in the ground,” he says. “And, that’s a big statement in a year because the global demand is strong. Supplies of corn and soybeans are relatively tight globally and in the United States.”

Expect price volatility to continue as the market focus shifts to weather.

“We’ve got a weather pattern right now that presents a problem — too wet in the East and too dry in the West,” Suderman says. “How will this impact the crops that we harvest this fall? That’s a real concern to the market right now. I think volatility is going to continue to be the name of the game — with big price swings likely in both directions.”

Looking forward, Brown says, the market must either incentivize new acres into the market to meet demand or take prices to high enough levels to ration demand.

“At this point, the only option really is for the market to ration demand,” he says. “So, we’re seeing these higher prices. The volatility will continue. These large shifts in the market will largely be a function of weather until we get a better idea of what this crop is going to look like come harvest.”

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