Corn or soybeans? Input costs will help decision

Net returns to farmland were very high in 2021 on average—but growers should not expect to repeat those result in 2022. That was one take-away from the latest World Agricultural Supply and Demand Estimates released Jan. 12, according to Michael Langemeier, associate director of the Center for Commercial Agriculture at Purdue University.

He said net farm returns were up by an average of $100 per acre in the 2020-21 season, but the coming season growers can expect to see high break-even prices.

“The 2022 season won’t be ‘bad’ but will be affected by large increases in production costs,” he said in a recent webinar. The rising costs of inputs by about 12% overall, especially nitrogen fertilizer, will have growers questioning, “Do I really need a fungicide application or a third herbicide application?”

Labor and machinery costs are also generally rising but are highly variable between regions, he said. These questions will affect planting decisions between corn and soybeans, which use less fertilizer than corn. Spring crop insurance prices could also be higher, according to Langemeier.

Soy estimates ‘right in the middle’

The WASDE estimates for soybean production were “right in the middle” of industry estimates, according to Nathan Thompson, associate professor of agronomy at Purdue. Soybean production was estimated at 4.44 billion bushels, up by 10 million with gains for Iowa and Indiana. The harvested area was estimated at 86.3 million acres, down slightly from the previous WASDE report. Soybean yields were estimated at 51.4 bushels per acre, up 0.2 bushels. Soybean supplies were raised 11 million bushels on higher production and slightly higher beginning stocks. With crush and export forecasts unchanged, ending stocks were projected at 350 million bushels.

The soybean stock-to-use ratios stood at 25.4%. James Mintert, director of the Center for Commercial Agriculture, noted that Brazil and Argentina production estimates could fall if dry, hot weather in the region doesn’t get relief.

Wheat outlook

The domestic outlook for 2021-22 United States wheat in January was for smaller supplies, reduced domestic use, lower exports, and higher ending stocks, according to the WASDE. Imports were lowered 10 million bushels to 100 million on a slower than expected pace for durum and hard red spring wheat.

The 2021-22 global wheat outlook was for stable supplies, decreased consumption, reduced exports, and increased stocks. World 2021-22 consumption was lowered by 1.9 million tons to 787.5 million tons, primarily due to lower feed and residual use for the U.S., the European Union and Ukraine.

Production increases in Argentina and the European Union were offset by decreased production in Brazil and Paraguay and lower beginning stocks for Russia. Argentina’s production estimate was increased 0.5 million tons to a record 20.5 million on updated. Argentina’s weather conditions were being closely watched, with hot and dry weather early in the month but estimates improving for corn. The Argentine planting season was being extended and spread out, according to Mintert.

Corn estimates

January’s 2021-22 U.S. corn outlook was for higher production, greater food, seed, and industrial use, lower exports and larger ending stocks. Corn production was estimated at 15.115 billion bushels, up 53 million bushels on a 0.3-million acre increase in harvested area. Total corn use was virtually unchanged at 14.835 billion. Langemeier noted that corn yields from Nebraska to Ohio are setting records; they were up 7% over yearly averages.

Exports, however, were lowered by 75 million bushels to 2.425 billion bushels, reflecting expectations of increased competition from other exporters. FSI use is raised 80 million bushels. Corn used for ethanol is raised 75 million bushels to 5.325 billion, based on data through November from the Grain WASDE-620-2 Crushings and Co-Products Production report and weekly ethanol production data as reported by the Energy Information Administration for December.

In the eastern Corn Belt, the corn basis for central Indiana was tracking lower than the 3-year average, according to Thompson. Using a regional crop basis calculating tool he developed at Purdue, Thompson said the slightly lowered prices indicates strong local supply in the region and less export competition for corn, except in areas closer to river ports. Thompson said he didn’t foresee a big jump locally in demand for ethanol anytime soon. He mentioned an expected cash price of $5.96 per bushel by May, with perhaps $5.39 at harvest time.

Parana at record lows

Even if Argentina beats the weather, it’s facing an issue with the Parana River, South America’s second-longest, which flows from Brazil to Argentina while bordering Paraguay, serving as a major grain export artery for all three countries. Lately, though, it’s been suffering from drought and is at its lowest level in 77 years, bringing waterborne traffic to a virtual halt and threatening the livelihoods of fisherfolk that depend on it.

David Murray can be reached at [email protected].