During the launch of Strategic Farming, Ed Usset, University of Minnesota Extension grain marketing economist, laid out a bullish argument for the next six months. Ending wheat stocks are projected to be the tightest in 15 years, excluding China’s stockpile. The same is true with world corn-ending stocks. In addition, the basis is strong.
On the other hand, factors favor a bearish outlook, such as a strong dollar, high prices, and lagging export and ethanol demands. Brazil is also expecting a record soybean harvest, offsetting the drought in Argentina.
An analysis of years with similar low wheat stock to use percentages after 1990 showed that Minneapolis May spring wheat futures rose from harvest until the following April in five of six\ years. The pattern for corn is similar, with rising May corn futures in seven of nine years.
“Although May futures are currently down for both corn and wheat, the fundamentals are still favorable to the market,” said Usset. However, there are a few caveats, including high prices, the war in Ukraine, ending stocks to use is a projection, and a three-year corn price rally is rare.
Could soybean biodiesel production bring another golden age of high crop prices? One such age was before and during World War I. A second occurred from 2007 to 2014, when ethanol production was rapidly expanding. In these examples, war and rapid demand growth were catalysts for higher prices.
Currently, several new soybean crushing facilities or expansions are planned within the next few years. While these plans shouldn’t affect the market this year, they may in the future as crop acres are juggled to meet increased soybean crushing demand.
Usset urges growers to look for pricing opportunities for the 2023 crop. “Don’t stand by and be overly bullish,” he advises. “Aim for a good average price and take advantage of pricing opportunities since they are still above production costs.”
Can this winter’s snowfall mitigate the drought? Pete Boulay, Assistant State Climatologist for the Minnesota DNR, explained that after a wet period from 2010 to 2019, where Minnesota had surplus moisture, 2020 began a series of dry years. The peak of the 2021 drought occurred in northwestern Minnesota in August. The drought continued and shifted south through 2022, peaking in November, and it continues today.
Throughout much of 2022, soil moisture levels kept dropping in the hardest-hit areas of the state. Then in November, Minnesota started getting precipitation, and most of the state has received about an inch of precipitation above normal levels since then.
During early fall, approximately 38% of precipitation will soak into the ground. Efficiency can increase to about 70% during late fall with no crop and less intense rainfall. If snow melts during the winter, efficiency can range from 5 to 50%, depending on soil frost conditions.
So far this winter, the frost is not deep. With little frost, precipitation efficiency could be as high as 50% when the snow melts, according to Boulay. Between the recent above-average precipitation and lack of a deep frost, there is hope for soil recharge going into the spring.
After below-average temperatures in December, we’ve seen above-average temperatures during January. The short 8-14 day projections are that this trend will continue through the month. However, the odds of hitting temperatures way above normal are slim due to significant snow cover.
The short-term precipitation trend looks to remain active not just for Minnesota but for a good portion of the U.S. this month.
The Climate Prediction Center indicates that we are still in a La Niña pattern, so we have equal chances for above or below-average temperatures from February to April. However, the La Niña pattern is starting to transition into a neutral phase, indicated by warming sea surface temperatures.
The longer-range precipitation outlook is tilting toward being above normal in the northern half and southeastern corner of the state. Equal chances are predicted for the rest of the state.
“It takes a while to get out of a drought scenario,” explains Boulay. “The waning La Niña pattern and above normal precipitation is an encouraging trend, but we will see what the spring brings.”
The University of Minnesota’s Strategic Farming: Let’s talk crops! webinar series, offered Wednesdays through March, features discussions with experts to provide up-to-date, research-based information to help optimize crop management strategies for 2023. Join us next week for “What’s bugging my corn?” For more information and to register, visit z.umn.edu/strategic-farming.
For more information from the University of Minnesota Extension, visit extension.umn.edu/crop-production.
