By Kent Thiesse
The late June USDA Acreage Report is always highly anticipated because it becomes the first “hard data” after the March USDA Plantings Intentions Report to indicate crop production levels for the growing season. Many times, the June USDA Report can have a significant impact on grain market trends, either upwards or downwards, and 2020 did not disappoint, with an initial positive market response for both corn and soybeans. Producers planted significantly less corn and slightly more soybeans than the March Planting Intentions Report, according to the latest USDA report on June 30. USDA surveyed more than 70,000 agricultural producers during the first two weeks of June to gather information for the June 30 USDA Report.
The biggest surprise in the June 30 USDA Acreage Report was that total 2020 planted corn acres in the U.S. were listed at 92 million acres, which was a decrease of almost 5 million planted corn acres from the March USDA Planting Intentions Report. The projected 2020 corn acreage in the June Report is still increasing about 3 percent from the 2019 planted acres. The 2020 U.S. estimated corn acreage compares to 89.7 million acres in 2019, 88.9 million acres in 2018, 90.2 million acres in 2017, and 94 million acres in 2016. The 2019 corn acreage was reduced due to 20 million prevented planting acres in the Upper Midwest, resulting from excessive moisture. The June 30 USDA estimates for the U.S. planted corn acreage in 2020 was well below the average estimates made by most grain market analysts. The result was a positive response to the corn futures prices on the Chicago Board of Trade (CBOT).
The June 30 USDA Report estimates that 83.8 million acres of soybean acres will be planted in 2020 across the U.S., which is an increase of 10 percent or 7.7 million acres from the 2019 planted acres that were also affected by prevented planting acres in the Northern Corn Belt. The projected 2020 U.S. soybean acreage was slightly above the March 1 planting intentions estimate. The USDA projection was below the average grain trade estimate by nearly 900,000 acres. It resulted in some strength in soybean prices on the CBOT immediately after the USDA report was released.
Based on the June 30 report, 2020 corn acreage is expected to increase in 24 of the 48 reporting States. The projected 2020 corn acreage for Minnesota is 8.1 million acres, an increase of 300,000 acres from 2019. At the same time, Iowa is estimated to increase by 500,000 acres to 14 million acres in 2020. The 2020 corn acreage in South Dakota is projected at 5.4 million acres, which is an increase of over 1 million acres from the 2019 planted corn acreage. Other major corn-producing states that have increases in 2020 planted corn acreage are Illinois, Indiana, Ohio and Wisconsin. The 2020 estimated corn acreage in North Dakota is 2.4 million acres, which is down by 1.1 million acres from 2019, while Nebraska’s total corn acreage was at 10.1 million acres, a decline of 300,000 acres from 2019.
The 2020 soybean acreage is expected to increase or remain steady in 24 of the 29 major soybean-producing states, as compared to 2019 acreage levels, including most major soybean producing areas in the Midwest. The most significant increase in estimated 2020 soybean acreage was in South Dakota with 5.2 million planted acres compared to 3.5 million acres in 2019. Minnesota is expected to have 7.4 million soybean acres in 2020 – an increase to 550,000 acres from 2019; while Iowa is projected at 9.4 million acres in 2020, which is an increase of 200,000 acres from 2019. Other major soybean-producing states have indicated increases in 2020 soybean acreage: Kansas at 750,000 acres, Ohio at 500,000 acres, Illinois at 450,000 acres, North Dakota at 400,000 acres, Indiana and Wisconsin at 300,000 acres, and Nebraska at 100,000 acres.
The June 30 USDA report pegged total 2020 U.S. wheat acreage at 44.3 million acres, which includes 11.5 million acres of hard red Spring wheat. The projected 2020 wheat acres would be the lowest total U.S. wheat acreage since USDA began tracking national crop acreage in 1919. The projected 2020 wheat acreage compares to 45.1 million acres in 2016. Significant declines in wheat acreage were reported in Minnesota, North Dakota, Nebraska, and Colorado. Based on the June 30 USDA report, total cotton acreage is estimated at 12.2 million acres, which is down approximately 11 percent from 2019 U.S. cotton acreage.
Some areas of the Eastern Corn Belt struggled with delayed planting this Spring, where weekly crop ratings for “good-to-excellent have been near 60 percent in recent weeks. On the other hand, crop conditions in the Western and Northern Corn Belt have been quite favorable with “good-to-excellent” corn and soybean ratings over 80 percent in Minnesota, Iowa, South Dakota and Nebraska. Some areas of the Western Corn Belt and Plains States have become quite dry in the past couple of weeks, as we head into the critical tasseling and pollination period for corn. As of early June, USDA is projecting 2020 national average yields at 178.5 bushels per acre for corn and 49.8 bushels per acre for soybeans, which compares to the record final U.S. average yields in 2019 of 167.8 bushels per acre for corn and 47.4 bushels per acre for soybeans.
The corn and soybean market prices showed an initial positive response to the much lower than expected 2020 corn and soybean acreage in the June 30 USDA report. Corn prices on the CBOT increased by over 30 cents per bushel, with July futures closing at $3.50 per bushel and December futures at $3.59 per bushel on July 1. Local cash corn prices and harvest forward contract prices also increased significantly, but at lower rates than the CBOT due to a widened basis level at many local markets. CBOT soybean futures on July 1 were at $8.91 per bushel for July and $8.98 per bushel for November, which were 70-80 cents per bushel above the post-COVID-19 futures prices in late April.
The June 1 USDA Grain Socks Report indicated over 3 billion bushels of corn inventory in on-farm storage, including 550,000 bushels in Minnesota and 660,000 bushels in Iowa. The Report also showed 633,000 bushels of soybeans stored on farms on June 1, including 85,000 bushels in Minnesota and 140,000 bushels in Iowa. Based on reports from many grain marketing analysts, it is anticipated that many of the corn and soybean bushels in on-farm storage were likely unpriced as of June 1. The increase in cash corn and soybean prices has given farm operators an unexpected opportunity to sell remaining grain inventories at higher rates than anticipated a few weeks ago.
The rise in “new crop” CBOT futures and local cash forward contract prices following the June 30 report provides an opportunity to forward price some of the expected 2020 corn and soybean production. Many producers used $3.25-$3.50 per bushel corn and $8.25-$8.50 per bushel soybean price estimates in their 2020 cash flow projections. For many farmers, those price goals may now be achievable for a limited period. Locking in a price on some the 2020 production can be a very good risk management strategy during these uncertain times. Given the favorable crop ratings in many major growing areas, along with the uncertainty in U.S. corn and soybean usage levels in the coming year, there is probably more downside risk in the corn and soybean markets in the coming months than there is for upside potential.
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2020 Cancellation Notice from Farmfest:
As the COVID-19 pandemic has affected the world, we have carried on, optimistic for the future. It takes thousands of exhibitors, partners, sponsors, volunteers and attendees to make Farmfest great and the safety, health and well-being of everyone involved with the show, their families, and surrounding communities is paramount. Therefore, it is with great disappointment and heavy hearts that we share that Minnesota Farmfest 2020 is cancelled. This decision was not made lightly, but rather in collaboration with officials and event partners. The great uncertainty caused by the COVID-19 pandemic, along with related governmental guidelines regarding large events, makes it impractical to hold a successful, engaging, and safe show. We understand that cancelling the show impacts the ag community but simply put, it is the right decision to make in these uncertain times.
Virtual Farmfest Forums:
We are pleased to announce that one popular part of Farmfest is going virtual in 2020! The annual political debates, listening sessions and public forums with political leaders and candidates are going virtual so you can learn about and participate in the issues that directly impact your farms, lives and families, especially in this political year. Stay tuned for more information about Virtual Farmfest Forums. Please sign up for updates about how to attend from the comfort and safety of your home.