Bill Biederman: A Dichotomy of Possibilities
Could 2022 offer the same profitable opportunities as 2021? The outlook for corn and soybeans is optimistic thanks to strong demand and potential production shortfalls in South America. Yet headwinds are present. We asked eight analysts to provide their best estimates on price direction and market strategies you can put to use in 2022.
Bill Biederman, AgMarket.Net
The price outlooks for corn and soybeans are initially about as different as a drought and a flood. Driven by inflation, supply chain issues, labor problems and those pesky tariffs that are still in place, U.S. fertilizer prices exploded. As a result, farmers are looking for specialty crops, rotation adjustments or will simply live on the soil bank and plant corn anyway.
If U.S. acres shift like they did the last time fertilizer prices exploded (2007-08), corn stocks could fall to 509 million bushels, which would be 700 million bushels shy of required pipeline needs. Soybean stocks could swell to 873 million bushels and would rival the record of 909 million bushels in 2018.
This exercise suggests acres cannot shift much, or end users of corn will go broke and soybean processors will swim in beans. For that reason, we believe the influences of supply-and-demand economics will push the corn:soybean ratio toward the equilibrium needed to bring balance toward acres.
If South American production is strong this year, we will likely see soybean prices decline while corn prices might not decline much at all. If South American production declines more than 10 million metric tons in soybeans, the need for U.S. soybean acres could maintain a foundation of strength under soybean prices, and corn will have to move to a price that will compete for ground. We cannot lose more than 3 million acres of corn.
The Bottom Line: Operating profit or loss drives all things at home. The only way we know how to navigate a year where the outlook has such a dichotomy of possibilities is to know your outcome if prices go up — or if they go down. Then hunker down and focus on production.
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