Events culminating in the fall of 2020 set a course for much higher feed grain prices in the 2021 crop year. In June of 2020, USDA was projecting a record U.S. corn crop just shy of 16 billion bushels. However, the severe “derecho” windstorm of August 2020 damaged corn fields from eastern Nebraska to Ohio, the most costly thunderstorm event in U.S. history. By January 2021, with the damage assessments accounted for, the crop size was reduced to 14.2 billion bushels. In Brazil, corn production in the 2020/2021 marketing year was reduced due to heat and drought in critical corn producing areas. Early season estimates of a record 4.3 billion bushel Brazilian corn crop ended with a disappointing 3.4 billion bushels.
Then, China began buying feed grain. Imports of corn and sorghum to China had fallen to 202 million bushels in the 2018/2019 marketing year. By the end of 2020/2021, these coarse grain import levels had grown to 1.35 billion bushels, with 1.41 billion projected for 2021/2022. In the U.S., thanks to record exports, corn days of use on hand at the end of the marketing year fell below the critical 40-day threshold to a 29-day supply to end 2020/2021, the lowest since the 27-day supply that ended the drought year of 2012/2013 (see Figure 1).
Figure 1. U.S. corn average farm price and days of use on hand at the end of the marketing year, 2005/2006-2020/2021, 2021/2022 estimate
Tight supplies and strong demand caused grain prices to surge from the fall of 2020 through summer 2021. In August 2020, the national average price for corn in the U.S. was $3.12 per bushel. By July 2021, the average cash price was $6.12 per bushel, the highest since 2013. With these prices as production incentives and normal weather forecasts, global corn production in the 2021/2022 marketing year is projected to break through the 45-billion bushel barrier (see Figure 2). Record crops are projected for major export competitors Brazil, Argentina, Ukraine, and Russia. U.S. days of use on hand at the end of the 2021/2022 marketing year is now projected to be a 35-day supply, a six-day increase compared to the year before.
Figure 2. World Corn Production
These same forces will likely shape feed grain prices in 2022. As we wrap up the 2021 crop in the Northern Hemisphere, prices are still relatively high but profits next season will be squeezed by higher input costs. Export demand, driven by the need for feed in China, will continue to drive global corn consumption.
With normal weather, the trend line corn yield in the U.S. for 2022 will be just above 178 bushels per acre, two bushels per acre higher than in 2021. Even if acres hold steady, that would mean a corn production increase over 2021 (add in higher beginning stocks as well). If total use is unchanged (largely impacted by the level of export competition), days of use on hand at the end of the 2022/2023 marketing year will likely continue to increase, putting downward pressure on prices.