The US soybean acreage in marketing year 2022-23 (September-August) is expected to rise with a simultaneous cut likely in corn acreage amid soaring fertilizer prices, according to analysts.
As the fertilizer price indexes hit record highs, the input cost pressure on fertilizer-intensive corn planting will be markedly higher than soybeans in 2022, analysts said. As a result, there could be a notable shift in planting decisions in favor of soybeans when the next planting window opens in May.
Global fertilizer prices have been supported primarily by supply-side tightness, coupled with a strong price rally in crop commodities since mid-2020.
According to the US Department of Agriculture's latest World Agricultural Supply and Demand Estimates report Oct. 12, while the average soybean prices for the marketing year are projected at $12.35/bu, up 14% on the year, corn prices have risen 21% year on year to $5.45/bu at this point in the marketing year.
S&P Global Platts assessments of soybean and corn prices have seen notable hikes as well.
SOYBEX FOB New Orleans was assessed at $493.19/mt Oct. 12, up 11% year on year, while CIF New Orleans corn was assessed at $234.05/mt, up 23.5% on the year.
Buoyed by multiyear-high crop prices, the fertilizer rates have soared to significant levels.
The Green Markets North America Fertilizer Price Index touched a record $996.32/st on Oct. 8, up 7.9% on the year.
The low-supply-driven spike in energy costs in Europe and China, especially natural gas – on which fertilizer manufacturing is heavily dependent – has pushed the prices of all nitrogen-based fertilizers to unprecedented levels, analysts said.
The current uptick in fertilizer prices is expected to continue in 2022 as easing coronavirus pandemic restrictions are likely to sustain global economic recovery and boost oil and natural gas prices.
Natural gas is a key input in the production of nitrogen-based fertilizers. And since corn is a fertilizer-intensive crop, its returns on planting are expected to be hit the hardest in 2022-23.
For US farmers' cost of production budget, fertilizer is a large component when it comes to corn, as producers need to treat fields during the fall ahead of winter and again in the spring after plantings, according to Terry Reilly, senior commodity analyst, Futures International.
As fertilizer cost accounts for almost 40% of the operating cost for the US corn farmers every year, it is expected that a sizable number of US farmers might opt for soybeans planting instead of bearing the high operating cost of corn planting.
The higher fertilizer prices will see farmers switching corn crops to soybeans (which naturally nitrogenate the soil) leading to lesser corn acres planted in 2022, Platts Analytics said.
Echoing a similar sentiment, the University of Illinois in its latest crop budget report said that the fertilizer, seed and drying costs for soybeans are forecast to be $226/acre cheaper than for corn in 2022-23. Consequently, a corn farmer in central Illinois is forecast to make $24/acre profit compared with $150/acre in soybeans.
This is a considerable difference in returns between the two crops and is likely to be a deciding factor in the next year's planting decisions.
"We see a minimum of 1.25 million-hectare shift from corn to soybeans in 2022-23," said Pete Meyer, head of grain and oilseed analytics at S&P Global Platts.
Soybean harvested area is forecast at 36.1 million hectares in 2022-23, up 1.2 million hectares year on year, while the corn acreage forecast was trimmed by 1.2 million hectares to 33.2 million hectares, Platts Analytics said.
Soybean price outlook bearish
With higher US beans acreage projected in 2022-23, the pressure on soybean prices in 2022 is very likely, analysts said.
The forecast rise in ending stocks is expected to put additional pressure on the situation and pull down oilseed prices.
According to the USDA, soybean ending stocks in the US for 2021-22 is forecast at 320 million bu, up 25% year on year.
With the USDA's record forecast for Brazilian soybean crop output 2021-22 at 144 million mt, US soybeans prices are likely to slide 20% on the year to less than $10/ bu by September 2022, analysts said.
The US is the world's second-largest soybean supplier after Brazil, and the biggest producer and exporter of corn.