Latest USDA WASDE report suggests lower grain prices

By Kent Thiesse

The USDA World Agricultural Supply and Demand Estimates (WASDE) Report released on May 12 projected a significant increase in U.S. corn ending stocks by the end of the 2020-21 marketing year. From a grain marketing standpoint, the report was widely regarded as “mixed” for the balance of the 2019-20 marketing year for both the corn and soybeans; however, the report was generally viewed as more “bearish” for 2020-21 grain price prospects. The 2018-19 marketing year extends from September 1, 2019, to August 31, 2020. The early 2020-21 ending stocks projections, especially for corn, will likely be a negative for any longer-term improvement in grain prices.  

Following are some highlights of the WASDE Report:

CORN:

According to the May 12 USDA WASDE Report, the projected corn ending stocks for the 2019-20 year, which ends on August 31, 2020, are estimated at 2.098 billion bushels, which surprisingly was nearly unchanged from the April Report, but was over 125 million bushels below the average grain trade estimate. The 2019-20 level of corn ending stocks would be a decline from 2.22 billion bushels in 2018-19. USDA is projecting that total U.S. corn use for 2019-2020 will be 13.83 billion bushels for livestock feed, ethanol, exports, etc., which is a decrease of about 45 million bushels from the 2018-19 level. The decline in corn usage was due to a fairly significant decline in the estimated corn used for ethanol production and lower projected corn export levels. This decrease was offset somewhat by a projected increase of 270 million bushels in corn used for feed in 2019-20.

The May WASDE Report offers an initial USDA estimate for ending stock levels for the 2020-21 marketing year. USDA is projecting corn ending stocks to increase to 3.318 billion bushels, which would be the highest level of U.S. corn ending stocks since the 1987-88 marketing year. The projected level of 2020-21 corn ending stocks represents an increase of over 1.2 billion bushels or 58 percent above the estimated 2019-20 corn carryover levels by the end of the 2020-21 marketing year on August 31, 2020. USDA is projecting total corn usage in 2020-21 to increase to by nearly 1 billion bushels to 14.8 billion bushels. USDA is forecasting increased usage levels for feed and ethanol production in 2020-21, as well as higher U.S. corn export levels. Many analysts are questioning the projected increases in feed and ethanol usage, given the impacts of the coronavirus outbreak in 2020.

USDA is estimating total U.S. corn production for 2020 to be a record at just shy of 16 billion bushels, which would be an increase of approximately 17 percent from the weather-reduced 2019 corn production level. The USDA Report expects an estimated 97 million acres in 2020 will be planted to corn in the U.S., 2020, which compares to 89.7 million acres in 2019, and 88.9 million acres in 2018. USDA is projecting a record average U.S. corn yield of 178.5 bushels per acre in 2020, compared to 168 bushels per acre in 2019 and the previous record yield of 176.4 bushels per acre in 2018. Corn planting progress in 2020 is running well ahead of the very late planting season in 2019.

As of May 12, USDA is estimating the average U.S “on-farm” corn price for the 2019-20 marketing at $3.60 per bushel, which was the same as the April WASDE estimate. The current USDA projected corn price compares to the final national average prices of $3.61 per bushel for 2018-19, $3.36 per bushel in both 2017-18 and 2016-17, and $3.61 per bushel for 2015-16. The first projected average corn price for the 2020-21 marketing year was set at $3.20 per bushel, which would be the lowest market year average price since 2006.   

SOYBEANS:

According to the May 12 WASDE Report, the projected soybean ending stocks for 2019-20 are estimated at 580 million bushels, which is an increase of nearly 21 percent, or 100 million bushels, from the April estimate. This level of movement in soybean carryover numbers from one month to the next in the Spring of the year is quite unusual. The May WASDE estimate was over 90 million above the average projections by grain marketing analysts. The projected 2019-20 U.S. soybean ending stocks level still represent a reduction of 329 million bushels from the 2018-19 soybean carryover level of 909 million bushels.

Total soybean usage for 2019-20 is estimated to be just over 3.90 billion bushels, which is just below 3.97 billion bushels estimated for 2018-19. The biggest change in soybean demand from the April WASDE report to the May report was a projected decrease of 100 million bushels for soybean exports in 2019-20. The decrease in exports mainly resulted from the slow level of soybean sales to China, following the initiation of the Phase 1 trade agreement earlier this year between the U.S. and China. USDA projected a slight increase in the bushels used for soybean processing in the U.S for 2019-20, compared to crush levels in 2018-19.

The May WASDE Report projects soybean ending stocks to decline by 30 percent for the 2020-21 marketing year to 405 million bushels. Total U.S. soybean production in 2020 is estimated at 4.125 billion bushels, which would be an increase from the estimated U.S. soybean production of just over 3.55 billion bushels in 2019, but would be below the 4.43 billion bushels produced in 2018. Planted soybean acres for 2020 are projected at 83.5 million acres, which compares to 76.1 million acres in 2019, 89.2 million acres in 2018 and the record U.S. planted soybean acres of 90.2 million acres in 2017. USDA is estimating a national average soybean yield of 49.8 bushels per acre in 2020, which compares to 47.4 bushels per acre in 2019, and 50.6 bushels per acre in 2018. The record U.S. soybean yield was 52.1 bushels per acre in 2016.  

USDA is estimating the U.S “on-farm” soybean price for the 2020-21 marketing year at an average price of $8.20 per bushel, which would be considerably lower than in recent years and would be at the lowest level since 2006. The projected $8.20 per bushel soybean price compares to the current 2019-20 estimated average soybean price of $8.50 per bushel, as well as the final average soybean prices of $8.48 per bushel in 2018-19, $9.33 per bushel for 2017-18, and $9.47 for 2016-17. Average soybean prices for 2020-21 will likely be highly dependent on the level of U.S. soybean exports to China and other countries. The export levels for 2020-21 are currently estimated at 2.05 billion bushels, which would be an increase of 375 million bushels from the 2019-20 export level of 1.675 billion bushels.

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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