MARCH CORN & SOYBEAN OUTLOOKWEDNESDAY, MARCH 10, 2021

James Mintert, Professor & Director, Center for Commercial Agriculture

Nathan Thompson, Assistant Professor, Dept. of Agricultural Economics

Michael Langemeier, Professor & Associate Director, Center for Commercial Agriculture

March World Ag Supply & Demand Estimates (WASDE) Highlights§ No Change in U.S. Corn Balance Sheet

• Corn Exports still forecast to total 2.6 billion bushels

• Carryover still projected to be 1.5 billion bushels, equal to 10.3% of usage

• U.S. 2020 MYA Corn Price unchanged @ $4.30/bu.

§ No Significant Change in U.S. Soybean Balance Sheet

• Soybean Exports still forecast to total 2.25 billion bushels

• Carryover still projected to be 120 million bushels, equal to 2.6% of usage

• U.S. 2020 MYA Soybean Price unchanged @ $11.15

March World Ag Supply & Demand Estimates (WASDE) Highlights§ Small Increase in World Corn Ending Stocks• World corn production forecast 89 million bushels above Feb. forecast

• No change in production forecast for Brazil or Argentina

• China’s total (all sources) corn imports still forecast @ 945 million bushels

• World corn ending stocks forecast 45 m. bushels higher than in Feb.

§ Small Increase in World Soybean Ending Stocks• Raised Argentina’s production forecast by 18 million bushels

• Raised Brazils production forecast by 37 million bushels

• China’s total (all sources) soybean imports still forecast @ 3.67 billion bushels

• World soybean ending stocks projected to be 14 million bushels higher than in Feb.

So Far, Total Corn Exports Up 82% This Year, Rise in Exports to China Accounts for 59% of IncreaseWill China Make More U.S. Corn Purchases?

0 0 1 0 2

278

582

975

698

1,034

566

1,030

0

200

400

600

800

1,000

1,200

15 16 17 18 19 20

Million Bu.

Crop Marketing Year (Starts on Sept. 1)

U.S. Corn Exports to China vs. Exports to All DestinationsSeptember 1st through 4th week of February, By Crop Marketing Year

Exports to China

Exports to AllDestinations

Source: USDA-FAS Purdue Center for Commercial Agriculture

So Far, Total Corn Export Shipments As % of WASDE Forecast Are On Track with 5-Year Average

31%

42%

29%

50%

32%

40%

0%

10%

20%

30%

40%

50%

60%

15 16 17 18 19 20Crop Marketing Year

Cumulative Weekly U.S. Corn Exports As % of Annual (WASDE) Total Thru 4th Week of February, By Crop Year

Source: USDA-FAS & USDA-ERS, 2020 based on March 2020 WASDE export forecast Purdue Center for Commercial Agriculture

Ethanol Production Hampered in February by Weather…Will It Recover this Spring and Summer?

12%

3%

-16%

-48%

-24%

-13%-9%

-4% -5% -8%-12% -9%

-21%

01/17 02/28 04/10 05/22 07/03 08/14 09/25 11/06 12/18 01/29WEEK ENDING

% Change in U.S. Weekly Ethanol Production from Prior YearJanuary 10, 2020-February 26, 2021

Source: U.S. Energy Information Agency Purdue Center for Commercial Agriculture

March 27, 2020

Ethanol Margins Have Improved Over the Last Month As Fuel Prices IncreasedHow Good Will Margins Be Later This Spring & Summer?

$0.36

($0.11)

$0.47 $0.56

$0.24

($0.20)

($0.10)

$0.00

$0.10

$0.20

$0.30

$0.40

$0.50

$0.60

09/03/19 11/26/19 02/25/20 05/20/20 08/14/20 11/09/20 02/05/21

$/Gallon

Date

Estimated Daily Ethanol Plant MarginsReturn Over Operating Costs, $/Gallon of Ethanol

September 3, 2019-March 5, 2021

Source: CARD, Iowa State University Purdue Center for Commercial Agriculture

Storage opportunities for corn?

22

$5.38$5.36

$5.40$5.44

$5.48

$5.37

$5.43

$5.50

$5.57

$5.30

$5.35

$5.40

$5.45

$5.50

$5.55

$5.60

Mar '21 Apr '21 May '21 Jun '21

Cash Forward Contract Corn BidsCentral Indiana

Cash Bid (Andersons at Delphi, INCurrent Bid + On-Farm Storage Cost ($0.01/bu/mo) + Opportunity Cost (6% APR)Current Bid + Commercial Storage Cost ($0.04/bu/mo) + Opportunity Cost (6% APR)

Central Indiana Corn Basis Following Recent Seasonal Pattern So Far…

23

Central IN Corn Basis This Year vs. 2010, 2011, 2012, and 2013 Harvest Years

24

+$0.25

Indiana Ethanol Plant Basis has Strengthened Recently

25

-40

-30

-20

-10

0

10

20

30

40

50

60

Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug

cent

s/bu

.

15-18 Avg 18-19 19-20 20-21

New Crop Corn Opportunities?

CBOT Dec. ‘21 Corn futures $4.77Expected corn basis October ‘21 in Central IN -$0.15Expected harvest cash price $4.62/bu.

§ Think in terms of risk management§ How can you protect favorable price opportunities while

leaving open upside potential?

26

New crop corn opportunities? Futures price spreads

27

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0

5

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30

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

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2006

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2000

cent

s/bu

.

New Crop Corn July minus Dec. Futures Price Spread in OctoberNew Crop Corn July minus Dec. Futures Price Spread in March

So Far, Total Soybean Exports up 78% This Year, Rise in Exports to China Accounts for 98% of the Increase

931

1,147

924

136

439

1,2671,393

1,598

1,388

9731,087

1,936

0

500

1,000

1,500

2,000

2,500

15 16 17 18 19 20

Million Bu.

Crop Marketing Year (Starts on Sept. 1)

U.S. Soybean Exports to China vs. Exports to All DestinationsSeptember 1st through 4th Week of February, By Crop Marketing Year

Exports to China Exports to All Destinations

Source: USDA Purdue Center for Commercial Agriculture

YTD Weekly Soybean Export Total Equals 86% of USDA’s March WASDE ForecastWith One-Half of the Marketing Year Remaining

72% 74%65%

56%65%

86%

0%10%20%30%40%50%60%70%80%90%

100%

15 16 17 18 19 20Crop Marketing Year

Cumulative Weekly U.S. Soybean Exports, As % of Annual (WASDE) Total Thru 4th Week of February, By Crop Year

Source: USDA-FAS & USDA-ERS, 2020 based on March 2020 WASDE export forecast Purdue Center for Commercial Agriculture

Central IN Soybean Basis Has Strengthened Seasonally & Remains Stronger Than The 2-Year Average

36

Central IN Soybean Basis To Date Parallels That of the 2013 Harvest Year…So Far

37

+$0.35+$0.75

New crop soybean opportunities?

CBOT Nov. ‘21 Soybean futures $12.33Expected soybean basis October ‘21 in Central IN -$0.30Expected harvest cash price $12.03/bu.

§ Think in terms of risk management§ How can you protect favorable price opportunities while leaving

open upside potential?

38

New crop soybean opportunities? Futures price spreads

39

-100

-80

-60

-40

-20

0

20

40

60

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

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2009

2008

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2000

New Crop Corn July minus Nov. Futures Price Spread in OctoberNew Crop Corn July minus Nov. Futures Price Spread in March

Net Return to Land in 2021 is Projected to be Similar to Net Return in 2020

$314 $302

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

$500

07 08 09 10 11 12 13 14 15 16 17 18 19 20 21

Cash Rent and Net Return to Land, West Central IndianaNet Return to Land Cash Rents

Production Prices are Expected to Climb in 2021

g = 3.25%Inflation Rate = 3.32%

0

50

100

150

200

250

300

1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 2020

USDA-NASS Prices Paid Indices - All Production Items1973 to 2021

Declined in 1983, 1985, 1986, 1998, 1999, 2002, 2009, 2015, and 2016.

Net Return Prospects for Corn and Soybeans for 2021 Currently Favor Soybeans in E. Corn Belt

-$150

-$100

-$50

$0

$50

$100

$150

$200

$250

07 08 09 10 11 12 13 14 15 16 17 18 19 20 21P

Difference in Earnings per AcreWest Central Indiana (Corn Minus Soybeans)

Current Fall Price Projections Still Favor Rotation Soybeans Over Continuous Corn in the Eastern Corn Belt

Soybean Price Low Productivity(C=135; SB=44)

Avg. Productivity(C=169; SB=55)

High Productivity(C=203; SB=66)

$10.50 $4.77 $4.67 $4.51

$11.00 $4.93 $4.83 $4.67

$11.50 $5.10 $4.99 $4.83

$12.00 $5.26 $5.15 $5.00

$12.50 $5.42 $5.32 $5.16

$13.00 $5.59 $5.48 $5.32

Corn Prices Required to Produce Per Acre Returns Equivalent to Soybeans

Second Year Soybeans versus Rotation Corn in the Eastern Corn Belt?

Soybean Price Low Productivity(C=144; SB=44)

Avg. Productivity(C=180; SB=55)

High Productivity(C=216; SB=66)

$10.50 $4.34 $4.28 $4.15

$11.00 $4.49 $4.43 $4.31

$11.50 $4.65 $4.58 $4.46

$12.00 $4.80 $4.73 $4.61

$12.50 $4.95 $4.89 $4.76

$13.00 $5.10 $5.04 $4.92

Corn Prices Required to Produce Per Acre Returns Equivalent to Soybeans

Corn is More Competitive on High Productivity Soil

253

371

509

292

408

527

290342

393

$0

$100

$200

$300

$400

$500

$600

Low Average HighLand Productivity Category

2021 Contribution Margin per Acre for Rotation Corn and Soybeans in Indiana

Corn Soybeans Overhead

2021 Acreage Decisions…

82

78

97

94

9089 90

91 92

75

80

85

90

95

100

05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21

Million Acres

Harvest Year

U.S. Corn Planted Acreage

Source: USDA-WADE Purdue Center for Commercial Agriculture

Acreage Battle Shaping Up…How Large Will Soybean Acreage Be?

89.2

76.1

83.1

90.0

60

65

70

75

80

85

90

95

05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21

Million Acres

Harvest Year

U.S. Soybean Planted Acreage

Source: USDA Purdue Center for Commercial Agriculture

10 Million Acre Increase Projected for Planted Acreage of 3 Major Crops in 2021

180

190

200

210

220

230

240

250

73 77 81 85 89 93 97 01 05 09 13 17

Million Acres

Harvest Year

U.S. Crop Planted AcreageCorn, Soybeans & Wheat Combined, 1973-2021

Source: USDA, Ag Outlook Forum for 2021 Purdue Center for Commercial Agriculture

What Do These Acreage Estimates Imply About The 2021 Crop Corn & Soybean Balance Sheets?

2021 U.S. Corn Balance Sheet• Assume 92 million acres planted & trend yield of 179.5 bpa

• Ethanol usage up 5% and small increase in exports

• Carryover projected to be about 1.6 billion bushels, between 10 & 11% of usage

2021 U.S. Soybean Balance Sheet• Assume 90 million acres planted & trend yield of 50.8 bpa

• Exports of 2.2 billion bushels (down slightly from 2020)

• Crush up slightly from 2020

• Carryover projected to be about 140-150 million bushels, about 3% of usage

Summary of Crop Insurance Products

§ Revenue Protection (RP)– RP establishes a minimum revenue guarantee based on projected price and farm

yield. If harvest price is higher than projected price, the revenue guarantee increases.

§ Supplemental Coverage Option (SCO)– SCO can be purchased on acres on which PLC was chosen. Provides coverage from

86% to the coverage level of the underlying RP or YP policy. Coverage is based on county yields rather than farm yields.

§ Enhanced Coverage Option (ECO)– ECO (90% or 95%) extends coverage from the selected level down to 86%, the point

where SCO begins to offer coverage. Premiums are relatively high, particularly for the 95% coverage level, because indemnity payments will be triggered more frequently.

Purdue Commercial AgCast PodcastFollowing Planting Intentions Report on

March 31, 2021

Next Webinar: Corn-Soybean Outlook Monday, April 12, 2021

Details Will Be Available at Purdue.edu/commercialag