ERS Charts of Note
Monday, March 22, 2021
In 2016, corn and soybean producers accounted for about 93 percent of future and options contracts used by U.S. farmers and 60 percent of all production covered by marketing contracts. With a futures contract, a farmer can assure a certain price for a crop that has not yet been harvested. An options contract allows a farmer to protect against decreases in the futures price, while retaining the opportunity to take advantage of increases in the futures price. While futures and options contracts are usually settled without delivery, marketing contracts arrange for delivery of a commodity by a farmer during a specified future time window for an agreed price. Farmers who use these risk management options frequently use more than one contract type. On average, farms that used futures contracts covered 41 percent of their corn production and 47 percent of their soybean production in 2016. Shares were relatively similar for marketing contracts, which covered about 42 percent of corn and 53 percent of soybean production. By comparison, corn and soybean farmers covered a little more than 30 percent of their production with options contracts for both commodities. This chart appears in the Economic Research Service report, Farm Use of Futures, Options, and Marketing Contracts, published October 2020.
Wednesday, February 10, 2021
Futures prices—the price of a contract to deliver a commodity at a certain time in the future—for wheat, corn, and soybeans have been trending upward since August 2020. This 6-month trend of rising prices accelerated in the first weeks of 2021, demonstrating stronger price gains in anticipation of USDA’s revised production forecasts for major U.S. grains in the World Agricultural Supply and Demand Estimates (WASDE) for January 2021. Hard red winter wheat futures prices for the nearby month (e.g., prices associated with an active futures contract with the shortest time to maturity/delivery) rose 72 cents per bushel (13 percent) during the 30-day period just ahead of the January 12, 2021 release of the WASDE. During the same 30-day period, corn and soybean contracts for nearby month delivery rose 98 cents and $2.69 per bushel, respectively (approximately 23 percent each), and the season average farm price of soybeans reached their highest level since the marketing year of 2013-14. The realization of tightening supplies coupled with robust demand from export markets, most notably China, have stimulated steady price increases for the big three U.S. row crops—wheat, corn, and soybeans. Additionally, dry conditions in key areas of corn and soybean production in South America have reduced regional production prospects and the outlook for global supplies, providing further support to associated U.S. commodity prices. This chart is drawn from the USDA, Economic Research Service’s January 2021 Wheat Outlook, Oil Crops Outlook, and Feed Grains Outlook reports.
Monday, November 30, 2020
As part of its response to the economic impacts of the COVID-19 pandemic, India has sharply increased its distribution of wheat and rice to the 800 million Indian citizens (about 58 percent of the population) eligible to receive subsidized rations. Facing major shocks to employment and incomes associated with nationwide measures to control the virus, India announced a relief program in March 2020 worth $22.3 billion. The program, now extended through November 2020, supplements the highly subsidized, standard monthly ration of 5 kilograms per person of wheat or rice with an additional free allocation of 5 kilograms. Implementation of the program led to a 75-percent increase in India’s total wheat and rice distribution from April to September compared with earlier years, with the average monthly distribution of rice more than doubling. India is a major global holder of food security stocks of both rice and wheat, as well as the world’s largest rice exporter—with 2021 exports forecast at 12.5 million tons. While India is currently forecast to maintain large surpluses of wheat and rice in government stocks during the October 2020-September 2021 marketing year, the sharp increase in subsidized domestic distribution has the potential to substantially reduce those food security stocks if the COVID-19 relief program is extended beyond November 2020 into the 2020-21 marketing year. This chart was drawn from the Economic Research Service’s Rice and Wheat Outlooks, November 2020.
Friday, November 20, 2020
Several countries in the “Horn” region of Africa are facing the brunt of what the U.N. Food and Agricultural Organization (FAO) describes as the “worst desert locust crisis in 25 years.” Paradoxically, grain production in those countries is forecast to hit record volumes. The current desert locust outbreak originated in mid-2018 when successive rain events in the arid Arabian Desert spurred vegetation development. The latter, in turn, provided ample feedstock for the burgeoning locust population. Trade winds blew the pests into Africa in early 2019, where the locusts settled into the low-elevation arid to semi-arid grasslands. Regionally abundant rainfall through the end of 2019 and into 2020 supported vegetation growth, which once again aided in the expansion of locust swarms. However, the locusts primarily remained in low-elevation grasslands, largely avoiding the higher-elevation grain production zones. Further, the rainfall that increased feedstock for the locusts also helped increase yields for agricultural crops, such as corn, barley, sorghum, and wheat. Ultimately—and despite a significant locust infestation—grain production in this region is forecast not only above the 2019 levels but also to reach the highest level on record. This situation mirrors that of the less severe locust infestation of 2003-05, during which aggregate grain production rose during the height of the outbreak. This chart is drawn from material included in the Economic Research Service’s Wheat and Feed Outlook reports from August 2020, and has been updated with November data.
Friday, November 13, 2020
U.S. farmers can use a variety of market tools to manage risks. With a futures contract, the farmer can assure a certain price for a crop that has not yet been harvested. An option contract allows the farmer to protect against decreases in the futures price, while retaining the opportunity to take advantage of increases in the futures price. Futures and options usually do not result in actual delivery of the commodity, because most participants reach final financial settlements with each other when the contracts expire. In a marketing contract, by contrast, a farmer agrees to deliver a specified quantity of the commodity to a specified buyer during a specified time window. Corn and soybean farms account for most farm use of each of these contracts, and larger operations are more likely to use them than small. With more production, larger farms have more revenue at risk from price fluctuations, and therefore a greater incentive to learn about and manage price risks. Fewer than 5 percent of small corn and soy producers used futures contracts, compared with 27 percent of large producers. Less than 1 percent of small corn and soy producers used options, compared with 13 percent of large producers. And about 19 percent of small corn and soy producers used marketing contracts, compared with 58 percent of large producers. This chart is based on data found in the Economic Research Service report, Farm Use of Futures, Options, and Marketing Contracts, published October 2020. It also appears in the November 2020 Amber Waves feature, “Corn and Soybean Farmers Combine Futures, Options, and Marketing Contracts to Manage Financial Risks.”
Friday, September 11, 2020
Producers of some of the U.S. major field crops have struggled to cover total costs of production over the past decade. The Economic Research Service’s (ERS) Commodity Costs and Returns product estimates this gap or surplus in the calculation of the value of production less total costs, referred to here as net returns. Total costs comprise operating costs, which include expenses such as fertilizer, seed, and chemicals, and allocated overhead (economic) costs, which include unpaid labor, depreciation, land costs, and other opportunity costs. Although revenue from selling crops can typically cover operating costs each year, net returns have often been negative. This suggests that, in some cases, allocated overhead costs are not covered. Corn’s net returns increased early in the decade, primarily due to a boom in the production of corn-based ethanol. Corn yields and acreage remained high after the boom, leaving supply high and leading, in part, to lower prices and returns over time. Net returns for soybeans shadowed those for corn during the ethanol boom, remaining higher than those for corn up until 2018. Wheat prices and returns also declined, due to strong international competition and several high-yield domestic crops. This chart is derived from data collected from the ERS Commodity Costs and Returns data product. Its data can also be viewed via ERS’s interactive data visualization product, U.S. Commodity Costs and Returns by Region and by Commodity.
Monday, August 24, 2020
The soybean-to-corn price ratio is often used as one of several tools in measuring profitability of soybeans and corn. The current ratio of U.S. soybean to corn prices has recently risen, sending a signal to farmers that the relative profitability of soybeans has increased over corn. Soybeans and corn are crops that compete for acreage in production and are complements in feed use. Their futures prices—the price of a contract to deliver a bushel of soybeans or corn at a certain time in the future—are used to calculate a ratio through dividing the soybean price by the corn price. Higher price ratios indicate that soybeans are relatively more profitable than corn. This ratio, which averaged 2.51 over the past 20 years, can tell farmers whether planting, harvesting, and storing one or the other crop might be advantageous. The ratio can also be used by livestock producers to indicate the price direction for feed ingredients. When the USDA, National Agricultural Statistics Service's June 2020 Acreage report indicated that less corn acreage had been planted than expected in early spring, futures prices for corn in marketing year 2020/21 increased by 8 percent. Soybean futures prices increased at the same time. Since late June, expectations of higher corn yields eroded the futures price for corn by 2.4 percent, while the price for soybeans increased by 1.1 percent. This differential in prices led to an increase in the soybean-to-corn price ratio from 2.64 to 2.71, a 2.5 percent increase from late June. This chart and associated data are drawn from the Economic Research Service’s Season-Average Price Forecasts data product.
Wednesday, June 10, 2020
The coronavirus pandemic has impacted both demand and supply chains, including the animal feed sector for a variety of commodities. U.S. corn-based ethanol production has also faced an unprecedented drop in demand as social distancing limited gasoline consumption. Against this backdrop, the global production of feed grains, which includes corn, sorghum, barley, and oats, is projected to reach a new record of 1.48 billion tons in marketing year 2020/21, up more than 5 percent from the previous year. The expected record-high U.S. corn crop provides about 80 percent of the growth in 2020/21 world feed grain production, but feed grain production outside the United States is also expected to increase to a record high. Although current low global corn prices might deter producers from expanding corn area planted, the depreciating currencies of many countries lift domestic prices and thereby expected profits, while policies and favorable weather within many countries also support production increases through area expansion. With the largest share of the increase in production coming from the United States, additional growth is projected in Ukraine, Brazil, and Mexico. Low corn prices are expected to continue into 2020/21, encouraging higher world-wide use for feed, ethanol, and trade after a decline in the current year. This chart is drawn from the Economic Research Service Feed Outlook, published in May 2020.
Thursday, May 7, 2020
The Renewable Fuel Standard (RFS), first established by the Energy Policy Act of 2005, requires specified volumes of renewable fuels be used to reduce greenhouse gas emissions and expand the nation’s renewable fuels sector. Corn-based ethanol is the primary fuel used to meet the standard. During the last full corn marketing year (2018/19), ethanol accounted for approximately 10 percent of the gasoline consumed in the United States. Over the same period, approximately 5.4 billion bushels of corn, or about 38 percent of total use, were consumed for ethanol. Recently, consumption of gasoline has plummeted due to COVID-19-related travel restrictions, leading to significant declines in both ethanol demand and prices. Although the RFS has ensured that the smaller volumes of gasoline being consumed contain approximately 10 percent ethanol, usage of crude oil at U.S. refineries (U.S. refiner net input of crude oil) fell about 5 percent during March, and consequently, ethanol blending (U.S. refiner and blender net input of fuel ethanol) dropped by approximately 318,000 barrels per day—down 35 percent—over the same period. Ethanol and corn prices have fallen concurrently: at Eastern Corn Belt (ECB) ethanol plants in Illinois, the weekly average price received for gasoline fell about $0.33/gallon (down 26 percent), while the price paid for corn fell about $0.61/bushel (down 15 percent) during March. This chart is drawn from the Economic Research Service’s U.S. Bioenergy Statistics topic page and Feed Outlook for April 2020.
Friday, February 21, 2020
Since 2010, the United States has been losing its dominant position as a corn import supplier to South Korea. Although Mexico is the largest foreign market for U.S. corn, before 2011 South Korea was a large and stable purchaser. However, the U.S. share in South Korea’s corn imports has dropped from 84 percent during the years of 2007-2011 to 46 percent during 2015-2019. In 2012, drought in the United States contributed to the loss in its corn export share vis-à-vis South Korea (and the entire world market) in that year. Yet, the main reason for the decline in U.S. corn export share with South Korea since 2012 has been that the amount of corn supplied by export competitors—in particular, Brazil and Argentina—has risen as large crops in those countries increased their price competitiveness (with some annual fluctuation). South Korea is a very price-sensitive grain importer, and Brazil and Argentina have been supplying corn at attractively low prices. The U.S. loss of corn import share in South Korea is part of a general trend of declining U.S. corn export share in the world, despite higher global corn trade and slightly growing U.S. corn production. This chart was previously published in the ERS Feed Outlook report released in January 2020.
Tuesday, August 13, 2019
The United States maintained its status as the world’s grain superpower for most of the post-World War II period by being the leading corn and wheat producer and exporter. Before the beginning of this century, the United States annually exported about a third of globally traded wheat and around 70 percent of corn. The emergence of new low-cost producers and exporters in the global wheat and corn markets reduced the U.S. share of grain exports and transformed global grain trade. Competition from Russia, Ukraine, and Argentina has weighed down U.S wheat exports share, while Brazil, Argentina, and Ukraine are driving down the U.S. corn export share. In October 2018, world demand for wheat had been growing at a steady pace, driven mainly by population growth in low-income countries and a switch from rice to wheat consumption in countries that are traditionally heavy rice consumers. This chart appears in the October 2018 Amber Waves article, “Major Changes in Export Flows Over the Last Decade Show the U.S. Is Losing Market Share in Global Grain Trade.” This Chart of Note was originally published October 11, 2018.
Tuesday, July 23, 2019
The North American Free Trade Agreement (NAFTA), which entered into force in 1994, significantly affected the U.S.-Mexico corn trade. From 1994 to 2007, the agreement permitted Mexico to regulate U.S. access to its corn market via a tariff-rate quota (TRQ). While these TRQs aimed to assist Mexico’s domestic producers as they adjusted to international markets, they also constrained the country’s ability to satisfy its growing demand for corn through the importation of yellow corn. Consequently, the Mexican Government opted to pursue a more liberal trade policy toward corn than that which NAFTA outlined, particularly during the later years of the transition to free trade. As a result, U.S. corn entered Mexico relatively freely during this period. Beginning in 2008, NAFTA lifted all formal restrictions, allowing U.S. corn to enter Mexico free of all tariffs and quotas. Since then, the annual value of U.S. exports to Mexico of corn and corn-based products has increased by about $1.8 billion in nominal terms since 2007. During the period 2016-18, the United States sold an annual average of 15.1 million metric tons of corn to Mexico, valued at about $2.8 billion, with additional corn-related products adding around another $1 billion. This chart appears in the ERS report, “The Growing Corn Economies of Mexico and the United States,” released in July 2019.
Friday, June 28, 2019
The corn “spot price” rose sharply in May as successive USDA crop progress reports showed corn plantings falling behind multi-year averages. Spot prices are those paid for immediate delivery, while futures prices are exchange-traded agreements to sell a commodity at a future price. Although corn spot and futures prices normally reach seasonal highs in the spring because of uncertainties about the crop size, the price increase in spring 2019 was far larger than in recent years. Corn prices in early June were nearly a dollar above prices in early May, an increase of over 20 percent. Prices have not been this high since June 2016. Whereas, normally, nearly all of a year’s corn acres are planted by the first week of June, only about 67 percent of expected 2019 corn acres were planted by the first week of June 2019. The high market prices reflect uncertainties about whether some of the remaining acres will be planted late, planted to a different crop, or not planted at all. Ongoing trade negotiations and the new USDA Market Facilitation Program—created to assist farmers affected by recent trade disputes—likely added to the uncertainty about how farmers would respond. This chart is based on data in the ERS Feed Outlook released in June 2019.
Tuesday, June 11, 2019
In absolute terms, average corn area harvested in the United States is about double that in Brazil, 6 times that in Argentina, and 7.5 times that in Ukraine. However, in terms of the rate of growth for average corn area harvested, Argentina and Ukraine have increased at a much faster rate over the past decade. Compared with average area harvested between 2008 and 2010, Ukraine has increased area by 89 percent while Argentina has increased its area by 85 percent. In contrast, Brazil’s corn area has grown by 28 percent and the United States has grown by 4 percent. While it is to be expected that a country harvesting more corn in absolute terms will have a lower harvested growth rate, Argentina and Ukraine’s growth rates show that the gap between leading corn producers (such as the United States and Brazil) and lesser corn producers (such as Argentina and Ukraine) is shrinking—although the gap remains large. A key result of this shrinking gap in absolute corn area planted is that Argentina and Ukraine have increased their share of global corn exports. This chart appears in the ERS Feed Outlook newsletter, released in May 2019.
Thursday, March 7, 2019
The United States is the world’s largest exporter of corn, and its exports have exceeded other countries in all years on record except for 2012, a year of severe drought conditions in the Midwest. In 2018, U.S. exports were nearly three times that of any of the closest U.S. competitors: Argentina, Brazil, and Ukraine. Although the United States is likely to remain the leading corn exporter for years to come, little of the global growth in corn trade since 2010 can be attributed to the United States, compared to the gains of its closest competitors. Collectively, Argentina, Brazil, and Ukraine have nearly tripled their exports, growing from 30 million tons in 2010 to over 86 million in 2018. In contrast, U.S. exports grew from 47 million tons in 2010 to 62 million in 2018, an increase of 34 percent. From 2010 to 2018, global corn trade increased from 92 million tons to 167 million, an increase of 75 million tons. Of that 75 million, 80 percent of the gains can be attributed to Argentina, Brazil, and Ukraine while the remaining 20 percent came from the United States. This chart appears in the ERS Feed Outlook newsletter, released in February 2019.
Thursday, October 11, 2018
The United States maintained its status as the world’s grain superpower for most of the post-World War II period by being the leading corn and wheat producer and exporter. Before the beginning of this century, the United States annually exported about a third of globally traded wheat and around 70 percent of corn. The emergence of new low-cost producers and exporters in the global wheat and corn markets reduced the U.S. share of grain exports and transformed global grain trade. Competition from Russia, Ukraine, and Argentina has weighed down U.S wheat exports share, while Brazil, Argentina, and Ukraine are driving down the U.S. corn export share. World demand for wheat has been growing at a steady pace, driven mainly by population growth in low-income countries and a switch from rice to wheat consumption in countries that are traditionally heavy rice consumers. This chart appears in the October 2018 Amber Waves article, “Major Changes in Export Flows Over the Last Decade Show the U.S. Is Losing Market Share in Global Grain Trade.”
Tuesday, October 9, 2018
The United States produces large amounts of corn for domestic uses such as animal feed, food use, and ethanol production, but 15 percent of production is exported. USDA data provide wholesale price information for corn (yellow #2 class) sold at different locations in the United States. Two notable points are Central Illinois and the Louisiana Gulf Coast. Corn sold in Central Illinois is often perceived to be destined for domestic markets, while Louisiana Gulf Coast prices are often a reflection of prices for export markets due to the Gulf’s role as a key shipping hub. Since there are no observable differences in yellow #2 corn sold in Illinois and yellow #2 corn sold in Louisiana, it is natural that the difference in prices would reflect the added transportation costs necessary to move corn from major corn-producing states in the Midwest to a Gulf state like Louisiana. An analysis of the difference in price between these two markets shows that the price differential over time closely tracks the average additional costs of rail or barge transportation to the Louisiana Gulf Coast. This chart is drawn from the ERS Feed Outlook newsletter, released in September 2018.
Wednesday, September 5, 2018
The United States is on track for another record-setting year of corn yields. USDA’s first survey-based yield forecast of the 2018/19 corn crop reported a yield gain of 4.4 bushels per acre to a record 178.4 bushels. This eclipses the record set during the 2017/18 marketing year (September-August). Over the long term, corn yields trended upward with limited interruption until 2010/11 when a severe drought impacted much of the Southern and Central United States. The drought continued through 2012/13 when yields reached their lowest point since 1995/96 at 123.1 bushels per acre. Since then, yields per acre have recovered significantly and are now on track for three consecutive record years. While per acre yields have reached new heights, the number of acres of corn harvested has declined slightly over the same period. As a result, total U.S. corn production in 2018/19 is projected to be just the third highest on record. This chart appears in the latest ERS Feed Outlook newsletter, released in August 2018.
Thursday, July 5, 2018
U.S. corn exports reached an all-time high in April at 7.7 million metric tons. Year-to-date corn shipments through May are estimated at 29 million metric tons, and USDA projections for exports in the 2017/18 crop marketing year (September-August) were raised to 58.4 million metric tons. The previous monthly record for exports was set in November 1989, nearly 30 years ago. Projections for May exports, based on export inspections, are higher than usual at this time of year, suggesting continued strength in the U.S. corn export market. This is due, in part, to continued drought in Argentina, a major corn supplier, reducing export prospects there. Additionally, Brazil is expected to have a poor crop, reflecting dry weather and less area planted for the second cropping season. As a result, importing countries have fewer options for sourcing corn, increasing U.S. competitiveness. A version of this chart appears in ERS’s Feed Outlook: June 2018 newsletter.
Thursday, October 5, 2017
Brazil, the world’s second largest ethanol producer after the United States, plays a large role in U.S. ethanol markets. Not only is Brazil one of the nation’s customers, it is also a competitor and a supplier. Brazilian ethanol is derived from sugar, which is desirable because it is categorized as an advanced biofuel under the renewable fuel standard. Through July of this year, the United States exported 770 million gallons of ethanol, with 40 percent of it going to Brazil. Of the 24 million gallons of ethanol imported into the United States, nearly all originated in Brazil. During this period, the Brazilian government took measures to lower fuel prices, causing sugar mills to switch from producing ethanol to sugar, because of higher returns. The resulting ethanol shortage has been filled by expanding imports from the United States. In response, the Brazilian government announced the imposition of a 20-percent duty on U.S. ethanol imports above the tariff rate quota of 160 million gallons (less than 4 months of shipments at current export levels). This will sharply reduce the competitiveness of U.S. corn-starch ethanol in Brazil and significantly reduce U.S. exports. Brazil is also implementing a new energy policy, called RenovaBio, which will increase ethanol production and consumption as part of greenhouse gas reduction commitments made under the 2015 Paris Climate Conference. This chart is drawn from the ERS Feed Outlook newsletter, released in September 2017.