Farm Futures survey: 2022 profit outlook unchanged
The past three growth cycles have been nothing short of turbulent for American row crop farmers. But producers are finding new ways to cope with blows as Mother Nature and volatile markets continue to bring uncertainty to farm-level management decisions.
What else is on the minds of farmers ahead of this week’s USDA reports? The Farm Futures survey for August 2021 gives some indication of the direction farmers think of the markets and the outlook for profit as harvest approaches.
The August 2021 Agricultural Futures Survey was conducted by electronic questionnaire from July 13 to August 1, 2021. A total of 737 producers from across the country responded. The survey’s margin of error was calculated at 3%.
Decrease in the area of prevention plants in 2021
The planting season for 2021 has prevented far fewer obstacles for farmers – especially in the northern plains – than in 2020 and especially in 2019 in drier conditions earlier this spring.
Profitable futures prices for row crops coupled with improved seeding conditions have paved the way for an increase in corn and soybean acreage this year. This spring’s total corn and soybean area of 180.2 million acres marked the largest area seeded to corn and soybeans since 2017. That year, the largest combined area was seeded, totaling 180 , 3 million acres.
Barring additional weather issues this year, 62% of survey respondents do not expect to receive any weather-related income or payments in 2021. About 11% of drought-stricken producers expect payments to be made. insurance will be paid for climate disaster relief. Another 17% of respondents expect to receive only a marginal amount of insurance payments that are unlikely to cover premium costs.
Anticipate USDA Yields
In a previous article, the August 2021 Farm Futures survey predicted 2021 corn yields to be 178.7 bushels per acre, while soybean yields averaged 51.3 bushels per acre. Learn more about the impacts of these estimates on supply and demand here.
Why do these results differ from the current USDA projections of 179.5 bpf for corn and 50.8 bpf for soybeans?
Certainly, harvesting conditions across the Heartland are variable for a wide variety of reasons. Drought in the Upper Midwest will likely play a big part in the lower yield estimates with 54% and 49% of corn and soybean growers, respectively, in the Farm Futures survey, citing heat stress and drought as having the greatest impact on yields.
But other factors in different parts of the Midwest also impacted crop yields this year. Excessive rains and cool soil temperatures during planting could potentially dampen corn yields more than soybeans by the time the combines start rolling this fall.
Most farmers are confident that USDA soybean yields in 2021 are unlikely to deviate dramatically from the 2020 yield of 50.2 bpy. The Farm Futures survey found that 41% of farmers surveyed expect the final 2021 soybean yield tally to be between 1 bpa and 50.2 bpa, with a further 33% anticipating no more than 3 bpa yield adjustment for the 2021 harvest.
Farmers expect to see more deviations from USDA corn projections in 2021 compared to 2020 by the time yields are finalized next January. Only 20% of respondents expect the USDA to revise 2021 yields by 1 bushel higher or lower than the 2020 yield of 172.0 bpa. Another 36% predict revisions to be between 2-3 bpa. The others anticipate revisions ranging from 4 to 10 bpa.
New year, new marketing plans
An unprecedented export season and rising domestic use rates have left few old crops in the bin across the countryside this summer. Farm Futures readers report that only 7% of the 2020 corn crop remains in storage (6% on-farm, 1% off-farm). Soybean stocks are slightly tighter with 6% (4% on-farm, 2% off-farm) remaining. Only 4% of the 2020 wheat supply was left after harvesting started earlier this summer (3% on-farm, 1% off-farm).
Most producers are not looking to change existing grain storage structures next year, as favorable base offers ease concerns about catching storage premiums. High construction costs are likely another factor holding back the construction of grain elevators in 2022. Only 9% of survey respondents indicated they would add grain elevators next year.
The majority of corn, soybean and wheat producers expect to store their crops without a price at harvest. Only 13% of survey respondents indicated they would use put options to protect priceless stored grain before this fall.
But many have already set the price of crops for delivery of crops. And while only 3% of corn growers and 1% of wheat growers are likely to buy back past sales with futures or options, a staggering 22% of soybean growers expect to use a variety of strategies. coverage to seize pricing opportunities throughout the 2021/22 marketing year. .
Corn, soybean and wheat producers expect at least half of the 2021 crop to be sold by December 31, 2021. Soybean (58%) and wheat (63%) sales will probably be more aggressive than those of corn (52%) by the end of the year.
Futures price expectations
In an era of tight supply, how do farmers think futures prices will react in the next marketing year 2021/22?
At the time of the survey, futures prices for new crop corn ranged from $ 5.00 to $ 5.40 / bushel. New crop soybean prices have fluctuated between $ 12.90 and $ 13.10 / bushel over the same period. And as the harvest approaches, farmers don’t exactly expect the crop’s price to rebound.
About 66% of survey respondents expected new crop corn prices to be lower than July prices by the end of October 2021. Another 59% of Farm Futures producers expect prices soybeans will be lower by Halloween 2021 than in July.
But farmers are more optimistic about the price outlook as the marketing season progresses. Survey respondents expect prices to rise by early 2022 with even higher hopes for better prices by the end of March 2022 compared to July 2021 prices.
About 56% of respondents believe corn prices will be higher than July 2021 prices by the New Year and 65% believe prices will be higher by March 31, 2022 Acreage Intentions report. Soybean producers are more optimistic about prices as supply tightens, with 61% of survey respondents expecting soybean prices to rise by January 2022 and 63% expecting that. soybean prices are higher than July 2021 by the end of March 2022.
Profits remain stable despite higher inputs
Farmers predict another year of high commodity prices to dampen the earnings outlook in 2021/22. In the Farm Futures survey of August 2021, 39% of respondents do not expect profits in 2022 to change significantly from those recorded in 2021. Only 29% of producers surveyed expect this to happen. that profit margins increase year over year in 2022.
But 32% of farmers believe profits will drop in 2022 compared to 2021. Among producers who expect losses, 85% cited high input costs as the main factor behind declining profits next year. And farmers don’t expect input prices to drop anytime soon.
About 87% of producers surveyed expect input prices to be higher in spring 2022 than in fall 2021, lowering the likelihood that farmers will postpone their fertilizer purchases in 2022 to next spring. This could put pressure on agri-retailers this fall if more growers decide to apply nutrients after harvest rather than later next spring.
More than 92% of those polled predict a rise in nitrogen prices next year. Producers expect the biggest price increase to be seen in phosphate fertilizers as trade flows continue to adjust to the countervailing tariff dispute between the United States, Russia and Morocco.
Respondents to the Farm Futures survey expect an average increase of 26% in phosphate prices in 2022, as phosphate stocks remain tight and production costs rise.
Inflation remains a major concern
Farmers overwhelmingly expect operating costs and overheads to increase in 2022 compared to 2021. While 41% of respondents believe the Federal Reserve will leave interest rates unchanged in 2022, 57% believe that the Fed will raise rates to fight rising inflation.