USDA forecasters are warning that net farm income will likely be down in 2021 from 2020. Forecasters believe net farm income will decline 8 percent as direct payments will be cut in half from last year. These payments accounted for 40 percent of farm income in 2020. The USDA is predicting net farm income this year at $111 billion as commodity values are expected to remain high.

Even though harvest is just getting underway in South America, trade is already starting to look forward to next year’s production, especially in Brazil. Brazil is expected to produce a record soybean crop this year, but an even larger crop will be needed next year to help satisfy global demand. Thoughts are Brazil will need to produce at least 140 million metric tons of soybeans next year just to keep global reserves from shrinking even further. Soybean futures will likely remain elevated until trade receives an indication of this happening.

Trade is also monitoring U.S. acres for this planting season which is more of an immediate factor. Analysts claim the United States needs to see at least 316 million planted acres this year, which would be a 12 million acre increase from last year. This means nearly all prevent plant acres from last year need to be seeded, along with some acres that are currently in the Conservation Reserve Program. The most attention is on soybeans, where at least 7 million additional acres are needed to prevent stocks from declining any further.

We are seeing mixed signals as to how many acres will be seeded this year, mainly on corn and soybeans. If only futures were used as an indicator, we would expect to see higher soybean acreage this growing season. If we would look at other factors such as input sales and usage, it would indicate higher corn plantings. While the United States cannot afford to lose acres from either crop, the most attention in on soybeans where stocks are already critically low.

The United States is seeing record demand for its soybean exports this year, with a large volume of these leaving through the Pacific Northwest. Soybean exports from this region total a record 469 million bu. Soybean exports from the PNW cost roughly 20 cents/bushel more than the Gulf, but freight is much less, especially to a buyer such as China. This is mainly from the shorter shipping time. As a result, some soybean suppliers to the PNW have posted stronger bids than those who ship to the Gulf.

The most interest when it comes to soybean exports remains on China. China is still waiting to receive South American soybeans as the cost and time involved with switching purchases to the United States makes that unlikely to happen. China is showing more interest in soybeans for September forward though. Thoughts are the United States may have new crop soybean by then, especially with reports of early seeding to capture the current market inverse.

Trade is becoming increasingly concerned with the volume of unshipped U.S. corn sales on the books. There are currently 1.3 billion bu of corn sales that are unshipped. This is a record and compares to just 500 million bu (mbu) a year ago. Given the wide price spread we are now seeing between the United States and other corn sources, mainly Argentina, cancellations of U.S. purchases are becoming more likely.

Of these outstanding sales, the most interest is on China. Of the unshipped U.S. corn sales nearly one-third is to China at 430 mbu. China has announced it will try to expand its domestic corn production this year, mainly by elevating plantings by 1.65 million acres. This will add an estimated 162 mbu of corn to China’s annual production. While this may not eliminate China’s need for imports, it will allow the country to be choosier in where it is sourced from.

More concerns are starting to be given the U.S. corn and soybean availability for later this marketing year. There are several models that indicate our current usage rate will deplete soybean reserves by summer which is why several crushers have halted meal sales. Ethanol producers hope to see elevated demand for fuel by then as the United States sees a return to more normal travel activity. The question now is if corn stocks shrink and futures will rally, will margins again turn negative? Given these possibilities, domestic usage of commodities may decline from current estimates.

The United States is not the only country showing worry over future commodity stocks. Several of the world’s leading grain and oilseed producers have placed restrictions on exports to help ensure adequate domestic reserves. This is also helping with food inflation. The commodity seeing this the most on is wheat, even though the world wheat supply remains adequate. The United States tends to use prices to ration demand rather than tariffs and quotas, but some economists believe this needs to change.

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