Focus on Ag: June 11 WASDE report lowers 2019 corn production

Kent Thiesse
Farm Management Analyst and Vice President, MinnStar Bank

The USDA World Agricultural Supply and Demand Estimates (WASDE) Report released on June 11 significantly lowered the projected 2019 U.S. corn production by 1.35 billion bushels from the May estimate. The number of 2019 planted corn aces and the national average corn yield were both adjusted downward, reflecting the serious planting delays and poor early season growing condition in many major corn producing States. USDA also increased projected on-farm average corn price projections for both the 2018-19 and 2019-20 marketing years.

Grain marketing analysts generally viewed the June WASDE Report as quite “bullish” for the corn market and basically “neutral” for the soybean market. The price projections in the WASDE Report are for the 2018-19 and 2019-20 marketing years. The 2018-19 marketing year runs from September 1, 2018 to August 31, 2019, and the 2019-20 marketing year runs from September 1, 2019 through August 31, 2020. In the first few days after the June WASDE Report, Chicago Board of Trade (CBOT) corn futures rose by over $.30 per bushel, and soybean futures increased by over $.40 per bushel.

Corn

USDA lowered the total estimated 2019 U.S. corn production to 13.68 billion bushels, which compares to 15.03 billion bushels in the May WASDE Report. The 2019 estimate compares to 14.4 billion bushels in 2018, 14.6 billion bushels in 2017, and the record U.S. production of 15.15 billion bushels in 2016. The projected U.S. corn yield for 2019 was lowered to 166 bushels per acre in the June Report, which was down from a May estimate of 176 bushels per acre. This is the largest USDA downward yield adjustment ever recorded from the May to June in the WASDE Report. The 2019 yield projection compares to other recent national average corn yields of 176.4 bushels per acre in 2018, the record U.S. corn yield of 176.6 bushels per acre in 2017, and 174.6 bushels per acre in 2016.

The WASDE Report also lowered the expected planted corn acres in the U.S by 3 million acres from May to June, 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. This represents a reduction of 810 million bushels from the May estimate. The level of expected corn usage for feed and exports was also reduced from the May estimate, reflecting the 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 at the lowest level since 2013-2014.

USDA increased the corn ending stocks by 100 million bushels for the current 2018-19 marketing year in the June WASDE Report, which ends on August 31, 2019. This reduction was based on a projected reduction in corn export levels, compared to the May Report. 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, 2.29 billion bushels in 2016-17, and 1.73 billion bushels in 2015-16. 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 Chicago Board of Trade (CBOT). Local cash corn bids have also improved substantially in the past few weeks.

The June 11 WASDE Report increased the projected average U.S “on-farm” corn price for the 2019-20 marketing year to $3.80 per bushel, which was a $.50 per bushel increase from the May estimate. This unprecedented increase in the estimated 2019-20 farm-level corn price 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, which was up a dime per bushel from last month. 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

According to the June 11 WASDE Report, the projected soybean ending stocks for 2018-19 were increased by 75 million bushels to a record level of 1.07 billion bushels. The projected 2018-19 soybean ending stocks level compares to carryover levels of 438 million bushels in 2017-18, 302 million bushels in 2016-17, and 197 million bushels for 2015-16. Based on the WASDE Report, soybean ending stocks for 2019-20 are estimated at 1.045 billion bushels, which would only trail the 2018-19 ending stocks level. However, it should be noted that the 2019-2020 ending stocks figure includes an increase of 250 million bushels in soybean exports from 2018-2019 levels, which many analysts feel may be 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, which are the same as the May estimates. 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; however, that may be offset somewhat by corn acres that were switched over to soybeans later in the planting season.

The June 11 WASDE Report estimated the average U.S on-farm soybean price for the 2019-20 marketing year at $8.25 per bushel, which compares to $8.10 per bushel in May. USDA is now estimating the average on-farm average soybean for the 2018-19 marketing year, which ends on August 31, 2019, at $8.50 per acre, which is a decrease of $.05 per bushel from the May estimate. 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.