Potentially Profitable Crop Prospects for 2022

Corn, soybean, wheat and cotton prices are expected to remain high in 2022 thanks to good demand, moderate supplies and weather-related production fears.

Despite skyrocketing input costs -- namely fertilizer -- good profit potential exists for commodities during the current marketing year and into the next, explains Will Maples, Mississippi State University (MSU) Extension ag economist, and DTN Lead Analyst Todd Hultman. It's a rosy economic outlook for the nation's four most-planted crops.

Commodity prices have rebounded dramatically since the height of worldwide COVID-19 lockdowns in mid-2020. Nearby cotton futures, for example, have more than doubled to nearly $1.30 per pound. Still, Hultman and Maples agree solid marketing strategies are needed to make the most of sale opportunities.

"Prices are there for pretty decent returns across the board going forward," Maples says. He provided the good news to farmers and ag industry officials during the 2021 MSU Row Crop Short Course in early December. "Keep an eye on exports, which will drive markets in the future.

"When it comes to marketing, if you can pencil in a profit, you need to consider it," he adds. "There are a lot of different marketing tools available."

Hultman stresses that farmers should also pay close attention to drought concerns in parts of Argentina, Brazil and the United States.

Corn and soybean prices jumped recently because of dwindling soy yields and corn-development concerns in South America. As of mid-February, the DTN national corn and soybean index is up 53 cents and $2.42 per bushel, respectively, in 2022.

Kansas City wheat prices this year are holding roughly steady near $8 per bushel. The threat of Russia invading the Ukraine, which is a large wheat producer, is bolstering prices. Wheat is also finding price support from worsening drought in the Southern Plains where winter wheat is grown.

"It's a big concern in 2022," Hultman says of the weather. "Prices can go higher or drop. It can get a little crazy."

Commodity buyers often bid up commodities trying to get farmers to sell inventories that aren't sold and boost production due, in part, to supply concerns.

Corn, soybean, wheat and cotton prices are expected to remain high in 2022 thanks to good demand, moderate supplies and weather-related production fears.

Despite skyrocketing input costs -- namely fertilizer -- good profit potential exists for commodities during the current marketing year and into the next, explains Will Maples, Mississippi State University (MSU) Extension ag economist, and DTN Lead Analyst Todd Hultman. It's a rosy economic outlook for the nation's four most-planted crops.

Commodity prices have rebounded dramatically since the height of worldwide COVID-19 lockdowns in mid-2020. Nearby cotton futures, for example, have more than doubled to nearly $1.30 per pound. Still, Hultman and Maples agree solid marketing strategies are needed to make the most of sale opportunities.

"Prices are there for pretty decent returns across the board going forward," Maples says. He provided the good news to farmers and ag industry officials during the 2021 MSU Row Crop Short Course in early December. "Keep an eye on exports, which will drive markets in the future.

"When it comes to marketing, if you can pencil in a profit, you need to consider it," he adds. "There are a lot of different marketing tools available."

Hultman stresses that farmers should also pay close attention to drought concerns in parts of Argentina, Brazil and the United States.

Corn and soybean prices jumped recently because of dwindling soy yields and corn-development concerns in South America. As of mid-February, the DTN national corn and soybean index is up 53 cents and $2.42 per bushel, respectively, in 2022.

Kansas City wheat prices this year are holding roughly steady near $8 per bushel. The threat of Russia invading the Ukraine, which is a large wheat producer, is bolstering prices. Wheat is also finding price support from worsening drought in the Southern Plains where winter wheat is grown.

"It's a big concern in 2022," Hultman says of the weather. "Prices can go higher or drop. It can get a little crazy."

Commodity buyers often bid up commodities trying to get farmers to sell inventories that aren't sold and boost production due, in part, to supply concerns.

Following are the commodity market projections from Will Maples and Todd Hultman. USDA crop and planting projections were made in February and October, respectively.

CORN

Latest USDA 2021-22 Projections:

93.4 million acres planted

15.12 billion bushels (bb) harvested for grain

Beginning stocks, 1.24 bb

Total Use: Domestic, 12.41 bb; exports 2.43 bb

Ending stocks, 1.54 bb

Average farm price, $5.45 per bushel

2022 U.S. Planting Projections:

Hultman -- 88 Million Acres

Maples -- 92 Million Acres

USDA -- 92 Million Acres

2022 Average Farm Price Projections:

Hultman -- $4.80 to $6.50 per bushel

Maples -- $4.50 to $5.50 per bushel

Hultman's analysis: "We've had very good demand for corn. There's a possibility we could see more demand from China since corn prices are more than $11 per bushel in the country. However, the Ukraine also had a good corn crop. China is buying from them lately but could return to the U.S. because of unrest in the region.

"For old-crop corn, anything above $6 per bushel is a tremendous opportunity for producers to make sales. I would not try to play guess-the-weather in South America and take advantage of good prices when they are in front of you.

"On new crop, for those who have bought fertilizer early, there are good opportunities for pricing up to 25% of expected production. If you don't have fertilizer on yet, or you are in the western Corn Belt on the edge of drought, I would be in no hurry to price new crop anything.

"In the major corn-growing states, cost of production should be in the $4.50-per-bushel range for high-yield corn producers of 200 bushels per acre or more."

Maples' analysis: "We're pretty much on pace for corn exports (USDA projections), and commitments are above average at the moment. Corn shipments are looking good. But, there's concern about China's reliability as a buyer. That's where I have some hesitation around the corn market. Last year, we exported a lot of corn to China, historical levels. If orders get canceled, we could see it (prices) trending down.

"Right now is the time you should consider booking some corn. If we plant 92 million acres, stocks will go up, and we could see downward pressure on the market. On average, forward sales pay off for corn going back to 2000. If you expect futures to go up and basis to strengthen, you are better off storing.

"Farmers may want to consider a delayed price contract or minimum price contract. If you think prices are going down, which is what I think will happen, make forward sales. Utilize hedging or buy options."

SOYBEANS

Latest USDA 2021-22 Projections:

87.2 million acres planted

4.44 bb harvested

Beginning stocks, 257 million bushels (mb)

Total Use: Domestic crush, 2.22 bb; exports, 2.05 bb

Ending stocks, 325 mb

Average farm price, $13 per bushel

2022 U.S. Planting Projections:

Hultman -- 88 Million Acres

Maples -- 89 Million Acres

USDA -- 87.5 Million Acres

2022 Average Farm Price Projections:

Hultman -- $10 to $14 per bushel

Maples -- $11 to $14 per bushel

Hultman's analysis: "Very soon, we will probably see quite a drop in soybean export activity that probably won't revive until fall as Brazil's harvest becomes available. The USDA projects a 4.9-billion-bushel harvest at this time, even with the dry weather in southern Brazil. I'm concerned that the USDA will have to dial down its export number.

"But, the size of Brazil's crop is still in question. The DTN soybean index (more than $15 in mid-February) has already exceeded my price projection due to weather scares. Anything above $13 is a very good price for old-crop beans. I suggest making installment sales during the first half of 2022 to reward yourself if prices escalate."

Maples' analysis: "Soybeans are on pace for exports (meeting USDA projections). The soybean market is looking good. At the moment, soybean prices are competitive with corn. Where the split between corn and soybean planted acres lands for 2022 will be a key factor in the price direction."

COTTON

Latest USDA 2021-22 Projections:

11.22 million acres planted

17.62 million 480-pound bales

Beginning stocks, 3.15 million bales

Total Use: Domestic, 2.55 million bales; exports 14.75 million bales

Ending stocks, 3.5 million bales

Average farm price, 90 cents per pound

2022 U.S. Planting Projections:

Hultman -- 12 Million Acres

Maples -- 12.5 Million Acres

USDA -- 12 Million Acres

2022 Average Farm Price Projections:

Hultman -- 80 cents to $1.25 per pound

Maples -- 85 cents to $1 per pound

Hultman's analysis: "I have a wide price range, but there's potential for drought across the South this year. That will be a concern in 2022. We had a tremendous year least year, and we are still riding the coattails of that. There will be a lot of incentive to plant, but how that goes is another story."

Maples' analysis: "It was a lot better harvest for cotton in 2021 and a lot less abandonment. Of the 11.2 million acres planted, we got 9.9 million harvested. Cotton exports face logistical challenges, which led to a drop in USDA export projections.

"Prices are good. However, there's drought concerns in West Texas, which contributes to volatility in cotton prices. With neutral to tightening stocks, with ending stocks at 3.5 million bales, the average market farm prices should hang around 85 cents to $1 per pound in 2022-23. That stock level should maintain the current cotton market."

WHEAT

Latest USDA 2021-22 Projections:

46.7 million acres planted

1.65 bb harvested

Beginning stocks, 845 mb

Total Use: Domestic, 1.13 bb; exports 810 mb

Ending stocks, 648 mb

Average farm price, $7.30 per bushel

2022 U.S. Planting Projections:

Hultman -- 49-50 Million Acres

USDA -- 49 Million Acres

Hultman's analysis: "DTN's national index of cash hard red winter (HRW) wheat at $8.16 per bushel (as of mid-February) is near its highest price in nine years, and USDA estimates ending supplies of all U.S. wheat at their lowest level in seven years. For 2022, I expect prices to find support at $6.50 per bushel on the low end should weather prove to be more favorable this year. On the high end, current prices are already attractive for producer selling, but threat of drought in the Southwestern Plains is giving HRW wheat bullish potential early, and we can't rule out the possibility of $9 per bushel.

"DTN's national index of cash hard red spring (HRS) wheat prices is at $9.44 a bushel (as of mid-February), down from a 10-year high of $10.37 per bushel in November. Even though spring wheat supplies are estimated at their tightest level in 14 years, it looks like end users are comfortable with the wheat they have secured. I expect $9.46 per bushel to be near the high of the year with a downside projection of $7 per bushel should weather cooperate.

"Weather, of course, will be the key factor of 2022, and many areas of the northwestern U.S. and western Canadian Prairies are still in need of moisture."

**

-- Follow the latest from Matthew Wilde, Crops Editor, by visiting the Production Blogs at dtnpf.com or following him on Twitter @progressivwilde

[PF_0322]

(c) Copyright 2022 DTN, LLC. All rights reserved.