Grain and oilseed prices will remain elevated next season, the top US ag forecaster said, although the prospect of growth in US corn and soybean sowings will see cotton and wheat values outperform.
Seth Meyer, the US Department of Agriculture’s chief economist, said that grain and oilseed markets will see “multiple price supportive features… continue in the 2021-22” season, after already driving notable gains in values this season.
The features “include the tightest beginning stocks for corn, soybeans, and wheat in several years, and expectations of continued strong import demand from China”, Mr Meyer told the USDA’s annual Outlook Forum, held online for the first time.
Corn prices will gain support too increased demand from ethanol plants, as recovery from the pandemic encourages a revival in fuel demand.
‘Tight global supplies’
“We expect grain and oilseed prices to remain at these higher levels reflecting tight global supplies and strong international demand,” Mr Meyer said, although noting the potential for a retreat in Chinese demand, or for bumper Brazilian or US crop yields, to “pull prices down”.
The assessment included a forecast that US growers, “facing high prices” of corn, will plant about 92m acres of the grain this year, compared with 90.8m acres last year, while soybean sowings will expand to 90m acres, up from 83.1m acres seeded in 2020.
Combined corn and soybean plantings, at 182m acres, will set a record high.
‘Strong international demand’
In fact, the expanded area will see corn prices “decline slightly” in 2021-22, “with larger corn acres and an expected return to trend yields leading to slightly higher ending stocks”, although with “strong global demand moderating the price decline”.
The USDA forecast average US corn prices next season easing by $0.10 a bushel from this season’s seven-year high, to $4.20 a bushel.
For soybeans, prices will nudge $0.10 a bushel higher, to an eight-year high of $11.25 a bushel, remaining “elevated” thanks to “continued strong international demand and tight stocks”, besides “strong domestic demand” encouraged by expansion in the renewable diesel sector.
Winter vs spring
However, a bigger rise was expected for wheat prices, forecast gaining $0.50 a bushel to a seven-year top of $5.50 a bushel, as corn and soybeans steal some area in spring sowings programmes.
“Higher expected net returns for corn and soybeans in the northern Plains are anticipated to reduce combined spring and durum wheat plantings.”
A forecast of total wheat sowings of 45.0m acres for the 2021 harvest implied a drop of more than 900,000, to some 13m acres, in combined seedings of durum and spring wheat.
“Wheat prices are projected to rise as lower carry-in stocks and supplies lead to tighter ending stocks,” Mr Meyer said.
‘Stocks to again decline’
For cotton, meanwhile, prices of upland fibre in 2020-21 were forecast averaging 75.0 cents a pound next season - up 7.0 cents year on year and an eight-year high.
Cotton too was expected to see some loss in area to other crops - although at 12.0m acres the forecast area for 2021 would represent a decline of some 1m acres year on year, and represent a higher total than the 11.5m-acre figure forecast last week by the National Cotton Council.
Nonetheless, “with a considerable reduction in carry-in stocks, and steady exports, ending stocks are expected to again decline in 2021-22 despite growth in the crop”, Mr Meyer told the conference.
He also noted “persistent dryness in some major cotton areas” that “adds uncertainty” to the production outlook.
The forecasts represent the opening salvo of data from what is one of the most-watched USDA events of the year, in releasing the first forecasts for next season based around current market conditions.
The USDA will on Friday release fuller balance sheet estimates for US crops, and world cotton, in 2021-22, before in late March unveiling revised domestic sowings forecasts based on a grower survey.