Focus on Ag: June 11 WASDE report causes very little market movement
The USDA World Agricultural Supply and Demand Estimates (WASDE) report released on June 11 was pretty much “non-eventful” from a grain marketing standpoint, with very little change from the May estimates. The number of 2020 planted corn and soybean acres, the national average yields, and the total 2020 production of both crops were unchanged from the May estimates. This is a far different scenario that a year ago, when acreage and yield projections for 2019 were adjusted downward in the June WASDE estimate, reflecting the serious planting delays and poor early season growing conditions in many major corn and soybean producing States.
Grain marketing analysts generally viewed the June WASDE report as “neutral” for both the corn for the soybean market, with some reasons for optimism and some areas of concern for both crops. The price projections in the WASDE report are for the 2019-20 and 2020-21 marketing years. The marketing year for 2019-20 runs from September 1, 2019 to August 31, 2020, and the 2020-21 marketing year ends on August 31, 2021. In the first few days after the June WASDE report, Chicago Board of Trade (CBOT) corn and soybean futures had limited movement up or down.
Following are some highlights of the June 11th USDA WASDE report.
USDA kept the total estimated 2020 U.S. corn production at the record level of 15.995 billion bushels, which was the same as the May WASDE report. The 2020 estimate compares to 13.6 billion bushels in 2019, 14.4 billion bushels in 2018, 14.6 billion bushels in 2017, and the previous record U.S. corn production of 15.15 billion bushels in 2016. The projected U.S. corn yield in the June report for 2020 is a record yield of 178.5 bushels per acre, which is the same as the May estimate. The 2020 yield projection compares to other recent national average corn yields of 167.4 bushels per acre in 2019, 176.4 bushels per acre in 2018, and the previous record yield of 176.6 bushels per acre in 2017.
The WASDE report projects 2020 planted corn acres in the U.S at 97 million acres and harvested acres at 89.6 million acres, which compares to 81.4 million harvested acres in 2019. Based on the large increase in U.S. corn acreage and the expected record national average corn yield. USDA is projecting a 58 percent increase in the corn ending stocks by the end of the 2020-21 marketing year on August 31, 2021. The 2020-21 carryover is estimated at 3.323 billion bushels which is an increase of 5 million bushels from the May estimate. The U.S. corn stock-to-use ratio in 2020-21 is expected to increase to an estimated 22.5 percent, which compares to a projected ratio of 15.3 percent in 2019-20. Some analysts anticipate that the total 2020 U.S. corn acreage and harvested acreage may be adjusted slightly downward in the June 30 USDA crop acreage report.
USDA increased the corn ending stocks by 5 million bushels for the current 2019-20 marketing year, which ends on August 31, 2020. This increase was based on a projected reduction in corn used for ethanol production, which was somewhat offset by lower adjustments in the final 2019 corn production levels. The projected corn ending stocks for 2019 are estimated at 2.103 billion bushels, which compares to 2.195 bushels in 2018-19, 2.14 billion bushels in 2017-18, and 2.29 billion bushels in 2016-17. The expected large increase in the corn supply for the 2020-21 marketing year could add considerable pressure to both the nearby and longer-term corn futures market prices on the Chicago Board of Trade (CBOT). Any rallies in local cash corn bids in the coming weeks might also be quite short-lived unless drought conditions move into the Corn Belt.
The June 11 WASDE report left the projected average U.S “on-farm” corn price for the 2020-21 marketing year unchanged from the May estimate at $3.20 per bushel. USDA also left the 2019-20 corn price unchanged from the May estimate at $3.60 per bushel. The most recent USDA corn price projections compare to final national average corn prices of $3.61 per bushel in 2018-19, $3.36 per bushel for both 2017-18 and 2016-17, and $3.61 per bushel for 2015-16. The current expected corn prices for the 2019-20 and 2020-21 marketing years would result in estimated PLC payments of $.10 per bushel 2019 and $.50 per bushel for 2020 for the FSA arm program on corn base acres. Producers in areas that had reduced corn yields in 2019 could also see a large 2019 corn ARC-CO payment.
According to the June 11 WASDE report, the projected soybean ending stocks for 2019-20 were increased by 5 million bushels to 585 million bushels. This estimate compares to carryover levels of over 1 billion bushels in 2018-19, 438 million bushels in 2017-18, and 302 million bushels in 2016-17.
USDA increased the soybean crush level in the June estimates, but lowered the expected amount of soybean exports for 2019-20. The soybean ending stocks for 2020-21 are now estimated to decline to 395 million bushels, which is a decline of 10 million bushels from the May estimate. However, it should be noted that the 2020-2021 ending stocks figure includes an increase of 400 million bushels in soybean exports above the current 2019-2020 export levels. This increase in 2020-21 soybean export levels will be largely dependent on full implementation of the Phase 1 trade agreement with China.
One “wild card” in the WASDE soybean estimates for 2020-21 may be the 2020 U.S. soybean production level. USDA left the 2020 planted soybean acres at 82.8 million acres and projected U.S. average soybean yield at 49.8 bushels per acre, which are the same as the May estimates. Some experts feel that U.S. soybean acreage could be increased in the June 30 USDA crop acreage report and that the national average soybean yield may be adjusted upward in future months, if the current favorable growing conditions continue in many portions of the Midwest. Of course, development of drought conditions over a large area of the region could also reduce the anticipated 2020 total U.S. soybean production.
The June 11 WASDE report estimated the average U.S. on-farm soybean price for the 2020-21 marketing year at $8.20 per bushel, which the same as the May estimate. USDA is now estimating the average soybean price for the 2019-20 marketing year, which ends on August 31, 2020, at $8.50 per acre, which is also the same as the May estimate. The latest USDA soybean price projections compare to national average soybean prices of $8.48 per bushel for 2018-19, $9.33 per bushel for 2017-18, and $9.50 per bushel for 2016-17.
The current soybean price projections for 2019-20 and 2020-21 would not result in a PLC payment for 2019 on soybean base acres; however, it would result in an estimated PLC payment of $.20 per bushel for 2020. Many producers are in the ARC-CO farm program for the 2019 and 2020 crop years. Soybean growers that had reduced soybean yields in 2019 and are enrolled in the ARC-CO program could receive a significant 2019 soybean ARC-CO payment, based on the current 2019-20 market year average price projection.