U.S. Agricultural Market Outlook: Corn & Wheat

by: Chris Zoller, Extension Educator, ANR in Tuscarawas County

The Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri recently released its latest U.S. Agricultural Markets Outlook.  The full report is available here: https://www.fapri.missouri.edu/wp-content/uploads/2022/03/2022-U.S.-Agricultural-Market-Outlook.pdf.  This article will provide a summary highlighting the corn and wheat outlook section of the report.

Introduction

The latest FAPRI report establishes projections for agricultural commodities out to the marketing year 2031/2032.  The data used to make these projections was based on information available in January 2022.  FAPRI recognizes much has changed since information was gathered, especially the war in Ukraine.  The authors of the report acknowledge that several factors may potentially impact the predictions.  These factors include exports, commodity prices, input expenses, net farm income, government farm programs, and consumer food prices.

The projections in this report assume no new ad-hoc government payments (like those related to the COVID-19 pandemic) will be provided and provisions of the 2018 Farm Bill will continue.  On a macroeconomic level, the authors recognize the uncertainty of oil markets, the likelihood interest rates will rise, and estimate corn variable costs will increase 2.2% per year.

Corn Outlook

After several years of prices below $3.70 per bushel, corn prices have increased, with nearby futures having hit nearly $8.00 per bushel recently.  The effective reference price escalator is expected to be triggered in the 2023/2024 marketing year.  Over this projection, the per bushel price for corn is expected to decline and average around $4.00.

Acres planted to corn this year are projected be just under 94 million.  Because of projected price declines, the number of acres planted to corn is expected to drop over the projection period.

No program benefits are expected for corn in this marketing year.  Net indemnities from crop insurance are expected to average $29 per acre and PLC payments at $21 per acre during the forecast period.  While not displayed in the graph below, ARC payments are expected to be like PLC payments.

Wheat

The war in Ukraine has created a great deal of discussion about wheat.  Russia and Ukraine account for approximately 30% of the world export market.  Continued fighting and port closures have many questioning how much of the wheat crop in these countries will be harvested and eventually exported.

Additional acres planted and an expected return to trend yields for the 2022/2023 result in an approximate 24% increase compared to last year.  This forecast calls for production, stocks, and exports to grow throughout the projection period.

For the second year the acres planted to wheat increased in 2022.  While we’ve experienced increases in wheat acres the last two years, this projection calls for all planted wheat acres to remain relatively level.

 

Crop insurance net indemnities have averaged about $7 per acre for wheat but are expected to average around $15 per acre over the projection period.  PLC payments for wheat in the near-term are expected to be small but increase in later years.

Moving Forward

The projections provided in this report are well researched given the information available today but are subject to change.  Weather, geopolitics, and many other factors are unknown and can’t be controlled.  However, I encourage you to manage what you can control and consider the following recommendations:

  • Know your cost of production. If the corn price projection in this forecast is correct, can you be profitable receiving, on average, around $4.00 per bushel?  Regardless of the commodity, knowing your cost is a critical first step.  Consider enrolling in the OSU Extension Farm Business Analysis and Benchmarking Program (https://farmprofitability.osu.edu/).
  • Use budgets and scenarios to plan. OSU Extension Enterprise Budgets are updated and available here: https://farmoffice.osu.edu/farm-management/enterprise-budgets.
  • Meet with your Extension Educator to review budgets and plans.
  • Talk with your input providers. What are they able to tell you about input price projections?
  • Keep your lender informed of your finances and plans.
  • Talk to family members about the future of your business.
  • Stay tuned to what is happening around the globe and the potential impacts to agriculture and your business.

 

 

 

 

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