Play Turner’s Take Ag Marketing Podcast Episode 253

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Election Day was on Tuesday but there is no end in sight for the Presidential Election. We expect multiple recounts and lawsuits over the next few weeks.  At the moment it looks like Biden is the President, the Republicans will hold the Senate, and the Democrats will hold the House of Representatives.  The Presidential election was closer than the experts forecasted and the Senate and House mix got even tighter.  The US clearly is an evenly divided country with no major party winning a clear mandate from the people.  Gridlock in Washington is viewed as positive for Wall Street and stocks have rallied.

We also talk about our estimates for 2021 acres, the prices that need to exist to drag out acres, and why we think the markets need to either work higher or stay at these prices.  The rest of 2020 and much of 2021 look bullish for the Ag markets.  If you want to know more then make sure you take a listen to this week’s Turner’s Take Podcast

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2021 Acres Estimates

Corn, wheat, and soybeans account for over 70% of farmable acres in the United States.  The mix of acres can range from 211mm (2019/2020) to 232mm (2014/15).  In years when we had high prices the mix of corn, wheat and soybean acres typically totaled in the high 220s.  To get that many acres out and planted corn needed to be over $4, wheat between $5 and $7, and soybeans over $10.

Due to the higher prices of wheat this year we see All Wheat acres at 46.5mm.  229mm acres was the 2nd highest acreage mix of W+C+S and that was in 2012/13.  229mm acres – 46.5mm = 182.5mm left for corn and soybeans. Soybeans has to have 90mm acres and a trend line yield just to keep soybean stocks constant year over year.  If soybeans ending stocks fall below 200mm, then we need 90mm next year and a 50.5 bpa just to keep stocks around 200mm.

That is why I think Nov 2021 has to trade to $10.40.  We need to make sure we have around 90mm soybeans acres minimum!.  That leaves 92.5mm acres for corn.  Corn will most likely trade above $4 for most of the year and acres stay about the same year-over-year.  With the improved demand for corn due to lower production out of Ukraine and the shortage in Brazil, ending stocks for this year could be 1.6 and next year 1.8 would be the starting point.

It is feasible that soybeans need to trade even higher to get more acres next year but if we are already planting 229mm (only 2012/2013 would be higher) and those new acres will have to come from Corn or Wheat, which are already at adequate stocks levels with relatively high prices.

Last year the US planted about 221mm acres. This year it needs to be at least 229mm, and 8mm increase minimum, and the highest we’ve seen since 2010 is 232mm.  Acres will be critical and if a strong La Nina year turns South American, stocks will go lower, US prices will go higher, and the competition for acres will be fierce.

Things could turn around for S American weather.  Demand from China and around the world could taper.  However, at the moment it seems like La Nina is getting worse and Arg and S Brazil are getting drier.  Demand is so good that corn and soybeans are on pace to add 500mm extra bushels in exports.  Elevated prices will be supported until more is known about S.