Focus on Ag: February WASDE report offers very few surprises
The most recent USDA World Agricultural Supply and Demand Estimates (WASDE) report was released on February 11. The latest WASDE report showed no change in 2019-20 corn ending stocks and a slight decrease in projected 2019-20 ending stocks for soybeans, compared to the January WASDE estimates. Following are some highlights from the latest WASDE report:
Corn WASDE summary
Based on the February WASDE and USDA crop production report, total U.S. corn production for 2019 is estimated at nearly 13.7 billion bushels, which is well below the total production levels of 14.3 billion bushels in 2018 and 14.6 billion bushels in 2017. The record U.S. corn production of 15.1 billion bushels occurred in 2016. The 81.5 million U.S. harvested corn acres in 2019 compares 81.3 million acres in 2018 and 82.7 million acres in 2017.
The 2019-20 corn ending stocks are projected to show a moderate decline from ending stock levels in the previous two years. The 2019-20 ending stocks are estimated at 1.89 billion bushels, which compares to 2.22 billion bushels in 2018-19 and 2.14 billion bushels in 2017-18. USDA expects total corn usage for 2019-20 to decline slightly from a year earlier, with a fairly large reduction in the level of corn exports; however, this is somewhat offset by projections for small increases in the amount of corn utilized for feed and ethanol
USDA is estimating the 2019-20 farm-level market year average (MYA) corn price at $3.85 per bushel, which is unchanged from the January U.S. price estimate. This compares to recent 12-month MYA corn prices of $3.61 per bushel in both 2018-19 and 2015-16, $3.36 per bushel in both 2017-18 and 2016-17, and $3.70 per bushel for 2014-15. The corn and soybean MYA prices for the 2019-20 crop year are based on the monthly average crop prices from September 1, 2019 through August 31, 2020, with the MYA prices finalized on September 30, 2020.
Soybean WASDE summary
According to the latest WASDE report, total U.S. soybean production for 2019 is estimated at nearly 3.56 billion bushels, which is unchanged from the January estimate. This compares to production levels of 4.43 billion bushels in 2018-19, 4.41 billion bushels in 2017-18 and 4.3 billion bushels in 2016-17. The total harvested U.S. soybean acreage in 2019 was estimated at 75 million acres, which far below the 87.6 million acres in 2018, the record level of 89.5 million acres in 2017, and 82.7 million harvested acres in 2016.
USDA is projecting 2019-20 soybean ending stocks to be 425 million bushels, which is a decline of 50 million bushels from the January estimate. The 2019-20 estimate is less than half of the final 2018-19 soybean ending stocks of 909 million bushels; however, it but is comparable to the 438 million bushel ending stocks in 2017-18. Soybean export levels for 2019-20 are projected at 1.825 million bushels, which is an increase above 2018-19 export levels. The expected increase in soybean exports is primarily due to some improvements in the trade conflict between the U.S. and China. Soybean exports to China accounted for approximately one-third of total U.S. soybean production in recent years prior to the initiation of the trade war with China in 2018.
USDA is estimating the 2019-20 MYA soybean price at $8.75 per bushel, which is a decline of $.25 per bushel from the January WASDE estimate. The $8.75 projected soybean price compares to final MYA soybean prices of $8.48 per bushel in 2018-19, $9.33 per bushel in 2017-18, $9.47 per bushel in 2016-17, and $8.95 per bushel in 2015-16.
Impacts on 2019 and 2020 farm program decisions
The price estimates in the February 11 WASDE report will likely be the last USDA market year average (MYA) price estimates that farm operators get before finalizing their farm program decisions for the 2019 and 2020 crop years. The MYA price estimates in the latest WASDE report were $3.85 per bushel for corn, $8.75 per bushel for soybeans, and $4.55 per bushel for wheat. The final 2019 MYA price for corn and soybeans is based on the monthly average MYA prices from September 1, 2019 through August 31, 2020, which are then “weighted” by the volume of bushels sold each month, before being finalized by September 30. The 2019 MYA prices for wheat and other small grains are calculated June 1, 2019 through May 31, 2020. Following is a summary of the impact of current 2019 MYA price estimates on farm program decisions:
• Corn: At an estimated MYA price of $3.85 per bushel, final 2019 county average corn yields will need to be about 18 percent below the county benchmark yield in order to earn any 2019 farm program payments through the ARC-CO farm program choice. The final 2019 corn MYA price needs to be below $3.70 per bushel to earn any 2019 payments through the price loss coverage (PLC) farm program choice, which does not look likely at this point.
• Soybeans: At an estimated MYA price of $8.75 per bushel, final 2019 county average soybean yields will only need to decline by about 3-5 bushels per acre below the county benchmark yield in order to earn a 2019 ARC-CO payment. A decline of about 10 bushels per acre or more below the county benchmark yield will likely result in close to the maximum 2019 soybean ARC-CO payment. The final 2019 soybean MYA price needs to be below $8.40 bushel to earn any 2019 payments through the PLC farm program choice, which is not to occur.
• Wheat: At an estimated MYA price of $4.55 per bushel, final 2019 county average wheat yields can be 2-3 bushels per acre above the county benchmark yield in order to earn any 2019 farm program payments through the ARC-CO farm program choice. The final 2019 wheat MYA price needs to be below $5.50 per bushel to earn any 2019 payments through the PLC farm program choice. It appears that there will be a significant 2019 PLC payment for wheat.
Farm operators are encouraged to enroll on the 2019 and 2020 farm program as soon as possible at local USDA Farm Service Agency (FSA) offices by March 16, 2020. Failure to enroll in the farm program for 2019 and to make a farm program choice for 2019 and 2020 will result in no payment eligibility for the 2019 crop year. The initial farm program choice is only for the 2019 and 2020 crop years. Beginning in 2021, farm operators will be able to make their farm program choices on an annual basis.
I have prepared a series of information sheets on 2019-20 farm program decisions. To receive a free copy, please send an e-mail to: firstname.lastname@example.org. For more information on farm program enrollment, farm operators should contact their local FSA office, or go to the USDA Farm Bill website at www.fsa.usda.gov/programs-and-services/arcplc.
Following are some good web-based farm program decision tools to assist producers:
• North Dakota State University: www.ag.ndsu.edu/farmmanagement/farm-bill.
• Kansas State University: www.agmanager.info/ag-policy/2018-farm-bill.
• Texas A & M Calculator: www.afpc.tamu.edu/tools/farm/farmbill/2018/.
• U of Illinois FarmDoc website: farmdocdaily.illinois.edu/.
• Iowa State University: www.extension.iastate.edu/agdm/info/farmbill.html.