Focus on Ag: July 12 WASDE report mostly neutral

Kent Thiesse
Farm Management Analyst and Vice President, MinnStar Bank
Kent Thiesse

As expected, the U.S. Department of Agriculture's World Agricultural Supply and Demand Estimates released on July 12 included increased corn acreage and the expected 2021 corn production; however, some of the added corn supply, compared to the June 2021 report, was accounted for by a slight increase in projected total corn usage for 2021-2022.

Grain prices have been mixed since the release of the WASDE report. Corn and soybean prices had been bullish immediately following the release of the USDA's 2020 crop acreage report on June 30, which indicated less corn and soybean acres than most grain marketing analysts expected. USDA estimated the 2020 corn acreage at 92.7 million acres, which was up by 1.6 million acres from the planting intentions on March 1.

Based on the July 12 WASDE report, USDA is projecting that 2021-2022 corn ending stocks will be 1.43 billion bushels by August 31, 2022, which is a slight increase of 75 million bushels in the carryover level in the mid-June WASDE report. The estimated corn ending stocks for 2020-2021 is 1.08 billion bushels, which was nearly the same as the June estimate.

The 2021-22 carryover level is based on June 30 estimate of 92.7 million planted corn acres and 84.5 million harvested acres in the U.S. in 2021, with an average U.S. corn yield at the record level of 179.5 bushels per acre. This resulted in an estimated 2021 total corn production of 15.16 billion bushels, which was up by 175 million bushels from the June report.

The 2021 total U.S. corn production compares to 14.2 billion bushels in 2020, 13.6 billion bushels in 2019, 14.3 billion bushels in 2018 and 14.4 billion bushels in 2017. The total corn usage for 2021-22 is estimated at just over 14.8 billion bushels, which would be slightly lower than the estimated total corn usage of just over 15 billion bushels for 2019-2020.

USDA is now projecting the 2021-2022 market year average (MYA) corn price at $5.60 per bushel, which is a decrease of $0.10 per bushel from the June WASDE report. The marketing year for the 2021 crop year will run from Sept. 1, 2021 through August 31, 2022. The final 2020-2021 national MYA price is estimated at $4.40 per bushel, which is up $0.05 per bushel from the June projection. This follows corn MYA prices of $3.56 per bushel in 2019-2020, $3.61 per bushel in 2018-2019, and $3.36 per bushel in both 2017-2018 and 2016-2017. 

Based on the July 12 WASDE report, USDA is now estimating 2019 U.S. planted soybean acreage at 87.6 million acres, which is an increase of 4.5 million acres from the 2021 soybean acreage, but is still below the record national soybean acreage of 89.2 million acres in 2018. The July 12 report projected a U.S. average soybean yield of 50.8 bushels per acre in 2021, which was unchanged from the June report.

Total U.S soybean production for 2021 is now estimated at just over 4.4 billion bushels, which would be an increase from the U.S. soybean production of 4.13 billion bushels in 2020, but is still below the record U.S. soybean production of 4.54 billion bushels in 2018.

USDA is projecting total soybean usage for 2021-2022 at 4.42 billion bushels, which is slightly below the 4.54 billion bushels of usage expected for 2020-2021. The projected decrease in usage for the 2021-2022 marketing year is the result of lower levels expected of soybean exports in 2021-2022.

USDA is now estimating soybean ending stocks at the end of the 2021-2022 marketing year to be at 155 million bushels, which would be a slight increase from 135 billion bushels expected for 2020-2021, but is well below the large soybean carryover levels in other recent years.

USDA is estimating the national MYA soybean price for the 2021-2022 marketing year at $13.70 per bushel, which is a decrease of $0.15 per bushel from the June report. This compares to an estimated soybean MYA price of $11.05 per bushel for the 2020-2021 marketing year, which ends on August 31, 2021. The final MYA price in other recent years were $8.57 per bushel for 2019-2020, $8.48 per bushel in 2018-2019 and $9.33 per bushel for 2017-2018.

Corn and soybeans usually gather the most interest in the monthly WASDE reports; however, wheat grabbed considerable notice in the recently released July 12 WASDE report.

Total U.S. wheat production for 2021 was listed at just under 1.75 billion bushels, which was down from 1.9 billion bushels in the June report. The estimated average U.S. wheat yield for 2021 was reduced from 50.7 bushels per acre in the June WASDE report to 45.8 bushels per acre in the July report, which is a rather large month-to-month adjustment.

Spring wheat production for 2021 is projected to decline by 42% from 2020 levels, which would be at the lowest production level since 1987-1988. Of course, a majority of the spring wheat is raised in the drought-stricken states of Montana, North Dakota and South Dakota. The 2021-22 MYA wheat price from June 1, 2021 through May 31, 2022 is now projected at $6.60 per bushel, which would be a 30% increase from the final 2020-2021 wheat MYA price of $5.05 per bushel.

There are still a lot of questions yet to be answered regarding both the supply and demand figures in the July 12 WASDE report. Based on the immediate corn and soybean market reaction, it is fairly obvious that weather conditions and crop production potential are currently dominating the marketing decisions of grain traders. Many private analysts feel that the final 2021 U.S. corn and soybean yields may be over-estimated by USDA, especially if drought conditions continue to expand and worsen in the northern and western Corn Belt.

Both North Dakota and South Dakota have considerable corn and soybean acreage in 2021, and many of those acres are currently being impacted by moderate to severe drought conditions, as well as many crop acres in portions of western Minnesota. There are also questions with regards to USDA’s 2021-2022 usage estimates, especially at the projected USDA prices for 2021-2022. Higher grain prices normally tend to reduce the amount of corn and soybeans used for feed, processing and exports. 

Corn and soybean prices were mainly neutral following the July 12 WASDE report. The overall market direction for new crop corn and soybean prices has remained fairly strong in recent weeks, with day-to-day market movements being closely linked to daily weather patterns and rainfall amounts. The Chicago Board of Trade (CBOT) prices for December corn futures closed at $5.56 per bushel on July 15, which was down slightly from $5.74 per bushel in mid-June, but still well-above the $4.71 per bushel futures price in mid-March of 2021.

A year ago, CBOT December corn futures were trading near $3.45 per bushel following the WASDE report in July of 2020. By comparison, CBOT December corn futures in mid-July were at $4.48 per bushel in 2019, $3.59 per bushel in 2018, $3.98 per bushel in 2017 and $3.58 per bushel in 2016.

The closing November soybean futures price on July 15 following the WASDE report were $13.80 per bushel, which is nearly the same as in mid-June and compares to the soybean futures price of $12.20 per bushel in mid-March. The current CBOT price for November soybean futures compares to new crop soybean futures prices in mid-July of $8.91 per bushel in 2020, $9.17 per bushel in 2019, $8.49 per bushel in 2018, $10.34 per bushel in 2017 and $10.57 in 2016.

Local forward cash prices for new crop 2021 corn have stayed near or above $5.00 per bushel at many locations in the Upper Midwest in recent weeks, with basis levels remaining much wider than the current cash corn basis in many portions of the region.

New crop 2021 soybean prices have ranged from $12.00 to over $13.00 per bushel across the Upper Midwest in recent weeks, with some processing plants offering over $13.50 per bushel at times. Farm operators have had several opportunities in recent months to forward price a portion of their expected 2021 corn and soybean crop at profitable levels.

One challenge with the very hot, dry weather in 2021, especially in the areas hardest hit by drought conditions, has been to make good estimates for their farm-level corn and soybean production levels for 2021.

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.