Grain markets dip with July WASDE report

By Kent Thiesse

Many grain marketing analysts expected the USDA World Supply and Demand (WASDE) Report released on July 10 to have a further positive impact on corn and soybean markets. Grain prices, however, were down significantly following the release of the WASDE report. Corn and soybean prices had been quite “bullish” since the release of the USDA 2020 Crop Acreage Report on June 30, which indicated 5 million fewer corn acres than the 2020 planting intentions on March 1. The June 30 report also reported less 2020 soybean acres than grain marketing analysts expected. The latest WASDE report used the updated national corn and soybean acreage from the June 30 USDA report.

Based on the July 10 WASDE report, USDA is projecting that 2020-21 corn ending stocks will be 2.65 billion bushels by August 31, 2021, which is a decrease of 670 million bushels in the carryover level in the mid-June WASDE report. The estimated corn ending stocks for 2019-20 is 2.25 billion bushels, which was increased by 145 million bushels from the June estimate. The 2020-21 carryover level is based on 92 million planted corn acres and 84 million harvested acres in the U.S. in 2020, with an average U.S. corn yield of 178.5 bushels per acre. This resulted in an estimated 2020 total corn production of 15 billion bushels, which was down by nearly 1 billion bushels from the June report. The 2020 total U.S. corn production compares to 13.6 billion bushels in 2019, 14.3 billion bushels in 2018 and 14.4 billion bushels in 2017. The total corn usage for 2020-21 is estimated at just over 14.6 billion bushels, which would be about 1 billion bushels higher than the estimated total corn usage for 2019-20.

USDA is now projecting the 2020-2021 market year average (MYA) corn price at $3.35 per bushel, which is an increase of $.15 per bushel from the June WASDE report. The marketing year for the 2020 crop year will run from September 1, 2020, through August 31, 2021. The final 2019-20 national MYA price is estimated at $3.60 per bushel, which unchanged from June. This follows corn MYA prices of $3.61 per bushel in 2018-19, $3.36 per bushel in both 2017-18 and 2016-17 and $3.61 per bushel in 2015-16.

Based on the July 11 WASDE report, USDA is now estimating 2019 U.S. planted soybean acreage at 83.8 million acres, which is an increase of 10 percent from the 2019 soybean acreage. But, it is still well below the record national soybean acreage of 89.2 million acres in 2018. The July 11 report projected a U.S. average soybean yield of 49.8 bushels per acre in 2020, which was unchanged from the June report. Total U.S soybean production for 2020 is now estimated at just over 4.13 billion bushels, which would be up considerably from the U.S. soybean production of 3.55 billion bushels in 2019. However, it is still below the record U.S. soybean production of 4.54 billion bushels in 2018.

USDA is projecting total soybean usage for 2020-21 at 4.34 billion bushels, increasing from 3.86 billion bushels for 2019-20. The increased usage for the marketing year is mainly due to higher levels expected of soybean exports in 2020-21. USDA is now estimating soybean ending stocks at the end of the 2020-21 marketing year to be at 425 million bushels, which is still high, but would represent a 31 percent decline from the 620 million bushels of carryover estimated for 2019-2019.

USDA estimates the national MYA soybean price for the 2020-21 marketing year at $8.50 per bushel, which is an increase of $.30 per bushel from the June report. This compares to an estimated soybean MYA price of $8.55 per bushel for the 2019-20 marketing year, which ends on August 31, 2020. The final MYA soybean price for 2020-21 compares other final MYA price in other recent years of $8.48 per bushel in 2018-19, $9.33 per bushel for 2017-18, and $9.47 per bushel in 2016-17.

There are still many questions yet to be answered regarding both the supply and demand figures in the July 10 WASDE report. Based on the immediate corn and soybean market reaction following the recent WASDE report, it is fairly evident that weather conditions and crop production potential are currently dominating the marketing decisions of grain traders. Many private analysts feel that the total 2020 U.S. corn yield may be under-estimated by USDA, especially if the Eastern Corn Belt gets favorable weather in mid-July during the critical corn tasseling and pollinating period. There are also questions with regards to USDA’s 2020-2021 usage estimates, which include increases in corn feed usage, in corn used for ethanol, and expanding corn export levels.

Grain marketing analysts are also questioning the current U.S. average soybean yield estimate of 49.8 bushels per acre, feeling that the nation could also increase beyond current USDA estimates. Some analysts also expect the final 2020 U.S. soybean acreage to be higher than the June 30 USDA projection. USDA is projecting a significant increase in soybean export levels in 2020-21, compared to 2019-20 and 2018-19 export levels. The increased soybean exports in the year ahead could be in doubt if the export levels in the Phase 1 trade agreement with China are not fully met. We should get a bit clearer indication of both 2020 corn and soybean production levels, as well as 2020-21 usage levels, in the coming months.

Even though both corn and soybean prices declined sharply following the July 10 WASDE report, the overall market direction for both “old crop” and “new-crop” corn and soybean prices has been in a somewhat “bullish” trend since the June 30 USDA acreage report. The Chicago Board of Trade (CBOT) prices for December corn futures closed at $3.45 per bushel on July 10, which was up from $3.32 per bushel in mid-May, but still well below the $3.80 per bushel futures price on March 10, 2020. A year ago, CBOT December corn futures for 2019 were trading near $4.48 per bushel following the July 11 WASDE report. By comparison, CBOT December corn futures were at$3.59 per bushel on July 12, 2018, $3.98 per bushel on July 12, 2017, and $3.58 per bushel on July 12, 2016.

Soybean futures prices on the CBOT have also increased since the May 10 WASDE report. The closing November soybean futures price following the July 10 WASDE report was $8.91 per bushel, about $.50 per bushel above the soybean futures price in late April. The current CBOT price for November soybean futures compares to “new crop” soybean futures prices of $9.00 per bushel on July 11, 2019, $8.49 per bushel on July 12, 2018, $10.34 per bushel on July 12, 2017, and $10.57 per bushel on July 12, 2016.

Local forward cash prices for “new crop” 2020 corn have stayed near $3.00 per bushel at many locations in the Upper Midwest, with basis levels remaining quite broad in many portions of the region. By July 10, the local, current, cash price for the remaining 2019 corn in on-farm storage was also near or just above $3.00 per bushel in most of the Northern Corn Belt. (There was some improvement in local basis levels, compared to April and May this year.) There have been very few opportunities in recent months for farmers to sell unpriced 2019 corn or to forward price “new crop” 2020 corn at profitable levels.

For additional information email Kent Thiesse, Farm Management Analyst and Senior Vice President, MinnStar Bank, Lake Crystal at kent.thiesse@minnstarbank.com.  

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