Commodity Price Outlook for 2022

STARKVILLE, Miss. (DTN) -- 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, according to Will Maples, Mississippi State University (MSU) 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 almost doubled in price to nearly $1.16 per pound. Still, Hultman and Maples said 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 said. He provided the good news to farmers and ag industry officials during the 2021 MSU Row Crop Short Course in early December on the Starkville, Mississippi, campus. "Keep an eye on exports, which will drive markets over the next few months.

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

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

Corn, soybean and wheat prices jumped recently due to dwindling soy yields and corn development concerns in South America. In December, March corn was up more than 25 cents per bushel and March soybeans were up nearly $1.13 per bushel. Until the final week of 2021, Kansas City wheat prices were finding support from worsening drought in the Southern Plains where winter wheat is grown. March Kansas City wheat has since fallen to its lowest prices in over two months as demand appears to have softened for hard red winter wheat.

"It's a big concern in 2022," Hultman said 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.

Here's projections from Maples, Hultman and USDA.

CORN

Latest USDA 2021-22 projections:

-- 93.3 million acres planted.

--15.06 billion bushels (bb) harvested for grain.

--Beginning stocks, 1.24 bb

--Total Use: Domestic, 12.33 bb; exports 2.5 bb

--Ending stocks, 1.49 bb

--average farm price, $5.45 per bushel

2022 U.S. planting projections:

--Maples, 94 million acres.

--Hultman, 90 million acres.

--USDA, 92 million acres.

2022 average farm price projections:

--Maples, $4.50 to $5.50 per bushel.

--Hultman, $4.80 to $6.50 per bushel.

Maples analysis: "We're pretty much on pace for corn exports (USDA projections) and commitments are above average at the moment. But we're not shipping a lot (of corn) at the moment; and how reliable is China to stick with buying U.S. corn? 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 cancelled, we could see it (prices) trending down.

"Right now is the time you should consider booking some corn. If we (plant) 94 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."

Hultman analysis: "We've had very good demand for corn. We had a tremendous start early this year with ethanol demand, but ethanol profit margins will tighten up with corn jumping higher. There's a possibility we could see more demand from China, but the Ukraine also had a good crop, so China is buying from them lately.

"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; 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 (bpa) or more."

SOYBEANS

Latest USDA 2021-22 projections:

-- Acres planted, 87.2 million.

-- Bushels harvested, 4.4 billion.

-- Beginning stocks, 256 mb.

-- Total Use: Domestic, 2.19 bb; exports 2.05 bb.

-- Ending stocks, 3,430 mb.

-- Average farm price, $12.10 per bushel.

2022 U.S. planting projections:

-- Maples, 87.8 million acres.

-- Hultman, 87 million acres.

-- USDA, 87.5 million acres.

2022 average farm price projections:

-- Maples, $10 to $13 per bushel.

-- Hultman, $10 to $14 per bushel.

Maples analysis: "Soybeans are on pace for exports (meeting USDA projections). The soybean market is looking good. But pricewise, even with the high input costs, the market is still favoring (planting) corn at the moment. Where the split between corn and soybean planted acres lands for 2022 will be a key factor in the price direction."

Hultman analysis: "Very soon we will probably see quite a drop in soybean export activity that probably won't revive until fall ... because of Brazil's harvest becoming available. It looks like a 5-billion-bushel (bb) 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.

"The upper end of my price projection is usually seen in the first half of the year and right now with weather scares, anything above $13 is a very good price for old-crop beans. The low end at $10 would be more the expectation at harvest, if we have good weather. Farmers are roughly looking at a production cost of $10 per bushel for the new season."

COTTON

Latest USDA 2021-22 projections:

-- Acres planted, 11.19 million acres.

-- Production in bales, 18.28 million 480-pound bales.

-- Beginning stocks, 3.15 million bales

-- Total Use: Domestic, 2.5 million bales; exports 15.5 million bales.

-- Ending stocks, 3.4 million bales.

-- Average farm price, 90 cents per pound.

2022 U.S. planting projections:

-- Maples, 12 million acres.

-- Hultman, 12 million acres.

-- USDA, 12 million acres.

2022 average farm price projections:

-- Maples, 80 cents to 95 cents per pound.

-- Hultman, 80 cents to $1.25 per pound.

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. That's really good for cotton. Upland cotton exports remain slightly off pace, so we could see USDA adjust export projections for 2021

"Prices are good. There's more excitement around it with weather patterns in West Texas drying up, which could add in more cotton acres there. With neutral to tightening stock, with ending stocks at 3.4 million bales, the average market farm prices should hang around 75 to 90 cents in 2022-23. That stock level should easily maintain the current cotton market."

Hultman 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."

WHEAT

Latest USDA 2021-22 projections:

-- Acres planted, 46.7 million acres.

-- Bushels harvested, 1.65 bb.

-- Beginning stocks, 845 mb.

-- Total Use: Domestic, 1.16 bb; exports 840 mb.

-- Ending stocks, 598 mb.

-- Average farm price, $7.05 per bushel.

2022 U.S. planting projections:

-- Hultman, 49 to 50 million acres.

-- USDA, 49 million acres.

Hultman analysis: "DTN's recent national index of cash hard red winter (HRW) wheat at $7.78 per bushel (as of the afternoon of Jan. 6) is near its highest price in nine years and USDA estimates ending supplies of all U.S. wheat at their lowest level in eight 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 $9.24 a bushel (as of the afternoon of Jan. 6), 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."

Matthew Wilde can be reached at matt.wilde@dtn.com

Follow him on Twitter @progressivwilde

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