Concern Grows Over US Corn Market Outlook

 

Every spring, economists look to corn futures, because they’re often an indicator of global price direction and domestic issues. Here’s a quick overview of the 2021-22 corn market outlook based on recent trends.

Decrease in Expected Planted Area

According to a late-March USDA forecast, farmers are planning to sow over 91 million acres of corn this year. While that’s the highest amount since 2016, it’s significantly lower than the 93 million acreage estimates from earlier in the year.

The situation is made even worse by growing drought conditions across the Midwest so far this year. Chuck Shelby, of Risk Management Commodities, explained to Agricensus, “I am very concerned about summer weather… The western US is in a major drought already. Unless a major pattern change happens later in spring or early summer, US yields will be impacted. If I were an end-user of corn I would be very concerned.”

Increased Demand and Pricing

These lower production levels have economists concerned, as corn prices have surged to some of their highest levels since 2013. This is due, in part, to strong export demand that has rebounded after dropping in 2020 in light of the COVID-19 pandemic.

USDA is forecasting a record 2.55 billion bushels to be exported this year. Economist Amanda Smith explains this increase, saying, “This is 43% higher than last year. Shipments to China account for 80% of the increase as they rebuild their pork industry after recovering from the African swine fever. With this increase in corn disappearance, ending stocks are the lowest on hand as in the past seven years.”

This leaves economists predicting higher corn prices as the year continues.

Smith continues, “As ending stocks-to-use goes down, price goes up. USDA is projecting a season-average price of $4.20 per bushel. This is up more than 60 cents per bushel over the past year. If ending stocks fall further, to below 10%, we are likely to see season-average prices increase again.”

 

We’ll continue to monitor this situation, and as more information comes available about actual corn production in the coming months, we’ll provide updates here.