While much of the interest in the U.S. commodity market remains on the harvest of this year’s corn and soybean crops, more interest is starting to be placed on next year’s production. We are already starting to see analysts release their acreage and crop estimates with nearly all showing higher numbers than this year. This is imperative for the market that U.S. production increases, given current supply and demand forecasts that already indicate low stocks to use numbers for the 2022/23 marketing year.

When it comes to next year’s production, most interest is on soybean balance sheets. This is from the fact the USDA is already predicting a very tight carryout this year of 200 million bu. This is a minimal 4.5 percent stocks to use ratio and is a level where a large crop is needed to replenish reserves. Trade has been focusing on this situation, but market reaction has been tempered by the large increase that is forecast for South American production.

The big question next year is what we may see for corn plantings. Input costs remain historically high and are likely to remain so well into the next production season. The most increase is on nitrogen fertilizer as global values are all elevated from last year. Compounding this issue is higher interest rates, something farmers have not faced in several years. The combination of these two factors may have a greater impact on corn plantings than other crops.

Last spring U.S. farmers seeded a reported 88.6 million acres of corn. This was the least amount of corn in recent history and was the result of less-than-ideal weather and the fact farmers were already facing high input costs. There are several who believe this total will rebound this year with some as high as 94 million acres. While this number of corn acres is possible it seems unlikely at this time. Given the contributing factors it is more likely U.S. corn plantings will total 91 to 92 million acres, which is still an improvement. As with soybeans, trade is aware of the possibility of a record corn crop out of Brazil this year and unwilling to push for additional acres at this time.

What is just as important as corn acreage next year is yield per acre. This year’s corn yield has declined from initial projections due to weather issues, mainly drought in the Western Corn Belt. This drought is forecast to improve and not be as much of a factor next year. Even if U.S. weather does improve, we may see farmers scale back on input usage if costs remain high, which can have just as much of an impact on final yields. Even if U.S. farmers seed a higher number of acres and weather is favorable, the average corn yield may suffer if farmers scale back on crop protection and nutrient applications.

A big factor in what we see for production of all crops next year, in both the United States and South America, is what happens with the current La Nina weather event. The current La Nina has now been in place to impact a third consecutive crop season in South America. Current conditions are highly favorable in Brazil to get crops seeded, but in Argentina, drought remains a major issue. In fact, the May to September time frame in Argentina has been the 3rd driest in 43 years. There are models that indicate the current La Nina will break down in early 2023 though, which would be a great benefit for both South and North American crop production.

Trade is starting to look more closely at this year’s projected corn demand and make some alterations. In the September WASDE, the USDA estimated corn exports at 2.275 billion bu (bbu) and feed and residual demand at 5.225 bbu. Current data indicates these may both be too high, possibly as much as 200 million bu (mbu) but likely more. While there is plenty of time for corn demand to recover, the longer it takes to develop the less optimistic trade will become. This is especially the case once the next South American crop becomes available.

The USDA may be underestimating Chinese corn demand, however. Analysts in China claim the country’s corn crop will total 240 million metric tons (mmt) this year, well below the current USDA estimate for a 274 mmt crop. China’s corn usage is forecast at 295 mmt, and if domestic production is as low as private analysts predict, the country’s imports will be larger than the 18 mmt the USDA is predicting. The question is if China will cover this shortfall with corn or a cheaper alternative grain, mainly wheat. Given the record crop in Russia, this may be used heavily.

RISK DISCLAIMER: The risk of loss in trading commodity futures and options is substantial. Before trading, you should carefully consider your financial position to determine if futures trading is appropriate. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results. The information contained in this report is believed to be reliable but is not guaranteed to accuracy or completeness by AgriVisor, LLC. This report is provided for informational purposes only and is not furnished for the purpose of, nor intended to be relied upon for specific trading in commodities herein named. This is not independent research and is provided as a service. As such, this is considered a solicitation.