Chip Nellinger has one central piece of advice for grain farmers heading into the 2021-22 crop year — fasten your seatbelts.
“It’s going to be a real volatile, bumpy ride in my opinion this spring and summer,” the Blue Reef Agri-Marketing analyst said during the United States Farm Report segment of the 2021 Commodity Classic conference.
If there is a weather scare this spring or summer, corn prices could rise to US$6 or $7 per bushel and new crop soybeans could hit $14 or $15.
If there is no weather scare and big yields prepare yourself for $3.50 corn and $10 beans, he said.
Farm Journal economist Chip Flory thinks the former is the more likely situation.
“Odds are very good that there’s going to be a supply side scare at some point in the marketing year,” he said.
“Be in position and ready to take advantage of that when it happens.”
Bob Utterback, analyst with Utterback Marketing Services, thinks farmers should consider locking in prices beyond 2021 if that option is available.
He thinks prices may eventually start to tumble under U.S. President Joe Biden’s administration.
Former President Donald Trump is responsible for the Phase 1 agreement with China that ignited the grain price rally, said Utterback.
However, he too is confident there could be a further price rally in 2021 before prices fizzle.
He thinks the U.S. Department of Agriculture is overestimating corn and soybean yields in its 2021-22 forecast calling for an average soybean yield of 50.9 bushels per acre and average corn yield of 179.5.
If farmers can only muster 49 bu. per acre of soybeans that would once again ignite oilseed markets.
Drought maps show that much of the western half of the U.S. is experiencing severe, extreme or exceptional drought.
The situation is worse than it was heading into the spring of 2012, a big drought year that saw crop prices soar.
Flory said farmers should establish a floor price at today’s values and use call options to enable them to participate in any future rallies.
“You’ve got to stay in a position where you can participate in an upside move,” he said.
He wouldn’t be surprised to see new crop corn prices of $5 per bu. and soybeans reach $15.
The USDA is forecasting 92 million acres of corn and 90 million acres of soybeans.
That is a big jump from last year plantings, especially for soybeans. But Flory said the market was hoping for between 185 and 190 million acres of both crops combined, so supply is still going to be tight.
The market wonders if a seven million acre increase in soybean plantings will be enough to satisfy demand coming out of China.
Nellinger said prices are up for every crop, not just corn and soybeans.
“We’re setting up for one of the biggest acreage battles that we’ve seen in a long, long time,” he said.
Cotton and spring wheat may steal some acres from corn and soybeans, making supplies even tighter.
And the U.S. winter wheat crop went into dormancy in the poorest condition in years and endured a fierce and prolonged winter cold spell with record low temperatures.
That could reduce supplies of that crop as well.
Flory said there will be little supply-side cushion to endure a major weather event.
The Climate Prediction Center says there is a 60 percent chance that the current La Nina conditions will transition to ENSO-neutral conditions during the northern hemisphere spring.
If that transition happens quickly it could result in a warmer and drier spring than many are anticipating, said Flory.
If it happens slowly the spring conditions are more likely to be cool and wet, causing a shift from corn to soybean and sorghum acres.
But it is the summer conditions that will really dictate what happens with grain and oilseed prices in 2021.