Focus on Ag: Surprising USDA grain stocks report

Kent Thiesse
Farm Management Analyst and Vice President, MinnStar Bank

The Sept. 30 USDA Grain Stocks Report surprised most grain marketing analysts and was quite bullish for corn and soybean markets. Grain stock estimates for corn, soybeans and wheat were all considerably lower than pre-report estimates. Following the USDA Report, December corn futures on the Chicago Board of Trade (CBOT) were up 14 cents per bushel and CBOT November soybean futures were up 30 cents per bushel. Wheat futures were also sharply higher.

The USDA Report estimated total U.S. corn stocks at 1.99 billion bushels as of 9-30-20, which down over 10 percent from the 2.22 billion bushels on 9-30-19. The September 30 corn stocks estimate was 255 million bushels lower that the average grain marketing industry estimates and was even lower than the lowest estimate by marketing analysts. Based on the latest estimate, U.S. corn stocks are at the lowest level on September 30th since 2016.

The biggest portion of the declining corn stocks was derived from USDA adjusting the June 30 corn stocks estimate downward by 205 million bushels. USDA also revised the final 2019 corn production upward by slightly under 3 million bushels, with small adjustments in harvested acres and final yield. USDA estimated that 751 million bushels of corn was stored on farms as of 9-30-20, which is down nearly 8 percent from a year ago, and represents about 37 percent of the total corn stocks. The latest report implies total corn usage for feed, ethanol, exports, etc., from July 1 to September 30 at just over 3 billion bushels, which is up slightly from a year ago. The CBOT December corn futures price has risen from $3.41 per bushel on 6-30-20 to $3.79 per bushel on 9-30-20.

USDA estimated total soybean stocks at 523 million bushels in the September 30 Report, which was down 42 percent from a year ago, but was still the third highest level of soybean stocks on record for end of September. The September 30th soybean stocks estimate was 53 million bushels lower that the average grain marketing industry estimates and was considerably lower than even the lowest estimate by marketing analysts.

It was estimated that 141 million bushels of soybeans were stored on farms as of 9-30-20, which represented approximately 27 percent of the total stocks. The latest report implies total soybean usage for processing, exports, etc., from July 1 to Sept. 30 at 858 million bushels, which is down about two percent from a year ago. However, due to the increased sales to China late in September, the actual soybean sales and stocks number may need to be adjusted in the next USDA Grain Stocks Report on 12-31-20. The CBOT November soybean futures price has risen by about 15 percent from June 30th to September 30th, increasing from $8.79 to $10.23 per bushel.

USDA finalizes 2019-20 MYA prices

USDA has announced the final 2019-20 Market Year Average (MYA) prices for corn and soybeans. The 2019-20 marketing year for corn and soybeans extended from September 1, 2019 to August 31, 2020, with MYA prices being finalized on September 30, 2020. The 2019 MYA price for wheat and other small grains is based on the average farm-level prices from June 1, 2019 to May 31, 2020, with the MYA price finalized on June 30, 2020. The final 2019-20 MYA prices are $3.56 per bushel for corn, $8.57 per bushel for soybeans, and $4.58 per bushel for wheat. All 2019 Price Loss Coverage (PLC) payments and Ag Risk Coverage program payments, both county yield level (ARC-CO) and farm yield level (ARC-IC), are based on the final national 2019-20 MYA price for a given crop.

Based on the final 2019 MYA prices and county yield estimates, following is an overview of potential 2019 PLC and ARC-CO payments for major crops in the Upper Midwest:

Corn:

  • A 2019 PLC payment of $.14 per bushel will be paid ($3.56/Bu. MYA price, compared to a reference price of $3.70 per bushel). 2019 ARC-CO payments are likely if the final RMA 2019 county yield is 10 percent or more below the BM yield. Maximum ARC-CO payment will likely occur with a 21 percent or more yield decline in 2019.

Soybeans:

  • No 2019 PLC payments will be paid at the final MYA price of $8.57/Bu. (reference price is $8.40/Bu.). ARC-CO payments are likely with a final 2019 RMA county yield decline of 2-3 Bu./A. below the BM yield. Maximum ARC-CO payment will likely occur with a 15 percent or more yield decline in 2019.

Wheat:

  • A PLC payment of $.92 per bushel will be paid ($4.60/Bu. MYA price, compared to a reference price of $5.50 per bushel). Near-maximum ARC-CO payments are also likely in many areas.

All PLC payments are paid on FSA farm unit yields, which are usually lower than normal yields. Final ARC-CO payment for counties have not yet been released; however, the ARC-CO payments should be close to estimates that were released earlier. Many counties in the Upper Midwest are likely to qualify for 2019 ARC-CO payments for soybeans. It should be noted that all 2019 farm program payments will be subject to a Federal sequestration reduction of 6.2 percent.

For the 2019 and 2020 crop years, 76 percent of the corn base acres in the U.S. are enrolled in the price-only, price loss coverage (PLC) farm program choice, and only 19 percent in the ARC-CO program choice. For 2019 and 2020, 80 percent of the soybean base acres are enrolled in ARC-CO and only 14 percent in PLC. For wheat, 93 percent of the base acres are enrolled in the PLC program and only 6 percent in ARC-CO.

Approximately, 6 percent of the corn and soybean base acres were enrolled in the farm yield-based ARC-IC program choice for 2019 and 2020. The ARC-IC acres were primarily in areas of Southwest Minnesota, Northwest Iowa, and Eastern Dakota’s that were impacted by low on-farm crop yields in 2019. Many of the producers that enrolled in this farm program option are likely to receive significant 2019 ARC-IC payments.

Previous county yields for corn, soybeans, and other crops, benchmark yields and revenues, FSA yields, ARC-CO payment levels, and other farm program information are available on the FSA ARC-PLC website, which is at: www.fsa.usda.gov/arc-plc. Kent Thiesse has prepared an information sheet titled: “2019 Farm Program Payment Estimates,” which is available upon request by sending an e-mail to kent.thiesse@minnstarbank.com

For additional information contact Kent Thiesse, farm management analyst and senior vice president, MinnStar Bank, Lake Crystal, Minn., at (507) 381-7960 or kent.thiesse@minnstarbank.com, or visit www.minnstarbank.com.

Kent Thiesse