Corn production trends lower in latest report

By Kent Thiesse

2019 projected U.S. corn production has been lowered significantly in the latest USDA World Agricultural Supply and Demand Estimates Report. Released June 11, the report dropped that number by 1.35 billion bushels from the May estimate.

The number of 2019 planted corn acres and the national average corn yield were both adjusted downward, reflecting the widespread serious planting delays and poor early season growing conditions. USDA also increased on-farm average corn price projections for both the 2018-19 and 2019-20 marketing years.  

Grain marketing analysts generally viewed the report as quite bullish for corn and neutral for soybeans. In the wake of the report’s release, Chicago Board of Trade corn futures rose by over $.30 per bushel, and soybean futures increased by over $.40 per bushel.

Following are some highlights of the latest USDA WASDE Report:

CORN

USDA lowered the total estimated 2019 U.S. corn production to 13.68 billion bushels, down from 15.03 billion bushels in May, and well below the recent high of 15.15 billion bushels in 2016.

The projected U.S. corn yield for 2019 was lowered to 166 bushels per acre, down from a May estimate of 176 bushels per acre. This is the largest downward adjustment ever recorded from May to June in the WASDE report. The 2019 yield projection compares to other recent national average corn yields around 175 bushels per acre.

Expected planted corn acres also dropped by 3 million acres, with the 2019 planted corn acres now estimated at 89.8 million acres. Based on the reduced U.S. corn acreage and the expected lower national average corn yield, USDA is projecting the corn ending stocks to drop to 1.675 billion bushels by the end of the 2019-20 marketing year on August 31, 2020, down 810 million bushels from the May estimate.

The level of expected corn usage for feed and exports was also reduced, reflecting tighter U.S. corn supply and likely higher corn prices. The U.S. corn stock-to-use ratio in 2019-20 is expected to decline to 11.8 percent, which would be the lowest level since 2013-2014.

USDA increased the corn ending stocks by 100 million bushels for the current 2018-19 marketing year, based on a projected reduction in corn export levels. The projected corn ending stocks for 2018-19 are estimated at 2.195 billion bushels, which compares to 2.14 billion bushels in 2017-18.

The expected large decline the corn supply for the 2019-20 marketing year has already added considerable strength to both the nearby and longer-term corn futures market prices CBOT. Local cash corn bids have also improved substantially in the past few weeks.

The projected average U.S “on-farm” corn price for the 2019-20 marketing year rose to $3.80 per bushel, a $.50 per bushel increase. This unprecedented increase reflects the seriousness of the weather challenges to the 2019 U.S. corn crop. USDA also increased the 2018-19 on-farm corn price to $3.60, up a dime per bushel.

The most recent USDA corn price projections compare to final national average corn prices of $3.36 per bushel for both 2017-18 and 2016-17, and $3.61 per bushel for 2015-16. The expected corn price increase for 2018-19 will lower potential 2018 ARC-CO payments for corn base acres in areas of southern Minnesota and northern Iowa that were impacted by weather issues during the 2018 growing season.

SOYBEANS

Projected soybean ending stocks for 2018-19 increased by 75 million bushels to a record level of 1.07 billion bushels. This is more than double the 438 million bushels in 2017-18, and much higher than 2016-2017 and 2015-2016. Soybean ending stocks for 2019-20 are estimated at 1.045 billion bushels, which would only trail the 2018-19 ending stocks level.

This figure, however, includes an increase of 250 million bushels in soybean exports from 2018-2019 levels, which many analysts feel is overly optimistic given the ongoing trade issues with China and other countries.

One “wild card” in the WASDE soybean estimates for 2019-20 may be the 2019 U.S. soybean production level. USDA left the 2019 planted soybean acres at 84.6 million acres and projected U.S. average soybean yield at 49.5 bushels per acre.

Many experts feel that the national average soybean yield may be adjusted downward in future months, reflecting delayed planting and poor early season growing conditions in many portions of the Midwest and Plains states. There also could be significant prevented planted acres in some areas due to continued wet weather.

Average U.S on-farm soybean price for the 2019-20 marketing year is now $8.25 per bushel, up from $8.10 per bushel. USDA is now estimating the average on-farm average soybean for the 2018-19 marketing year at $8.50 per acre, a decrease of $.05 per bushel. The latest USDA soybean price projections compare to national average soybean prices of $9.33 per bushel in 2017-18, $9.50 per bushel for 2016-17, and $8.95 per bushel in 2015-16.  

For additional information email Kent Thiesse, Farm Management Analyst and Senior Vice President, MinnStar Bank, Lake Crystal at kent.thiesse@minnstarbank.com.  
 
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