The official start of spring is just a few weeks away. As the planters start rolling and acres are claimed by crops, how will grain prices respond?
For 2018, USDA predicts corn and soybean acres to be equal—with 90 million acres dedicated to each crop. Additionally, USDA forecasts 46.5 million acres of wheat, 13.3 million acres of cotton, 2.9 million acres of rice to be planted this year.
Based on these production estimates, shared at USDA’s 2018 Agricultural Outlook Forum, this year’s season-average price for corn is forecast at $3.40, which is up 3% from 2017. The season-average price for soybeans in 2018 is forecast at $9.25, a 0.5% drop from 2017.
“With a healthy global economic outlook and growing global demand, we expect prices to remain relatively flat,” said Joanna Hitchner, economist, USDA, World Agricultural Outlook Board, at last week’s forum.
What could change these price and production estimates? Keep your eye on these five factors.
1. U.S. share of global exports. The U.S. has seen declining shares of global exports for corn and wheat. “For soybeans, we have maintained about 40% market share over the past few years, but in 2017/18 our share is expected to decline due to robust South American exports,” she says.
2. China’s soybean demand. U.S. exports to China are projected at $21.6 billion, and China now accounts for 65% of the total trade in soybeans. “For soybeans, the story continues to hinge on China,” said Robert Johansson, USDA Chief Economist, at the forum. “The dominance of China in the soybean market will not only continue but grow in importance over the next decade.”
Additionally, the number of middle-class households in China will nearly double, approaching 370 million households by the year 2026.
3. U.S. ethanol demand. For 2017/18, corn used in ethanol production is expected to account for 40% of total corn use. This is a marginal increase from the previous year, but below the average of 2011/12 and 2012/13. Overall, USDA predicts slower growth in U.S. ethanol demand.
4. U.S. dollar strength. The U.S. dollar has been weakening, which might prop up U.S. exports, Hitchner says. USDA predicts more stability in the years ahead for the countries that buy U.S. agricultural goods, as their currencies continue to gain strength against the U.S. dollar.
5. La Niña. The weather is always a potential wild card. If the La Niña weather pattern develops, it could impact crop development in both the Northern and Southern hemispheres.
Read more: 8 Ag Statistics to Know in 2018