Well, it wasn’t as bad as it could have been. The May 12, 2020, World Agricultural Supply and Demand Estimates (WASDE) reports show increased supplies and some increasing demand.
Here are the details:
- Corn: The corn crop is projected at a record 16.0 billion bushels. Total corn supplies are forecast record high at 18.1 billion bushels. With total U.S. corn supply rising more than use, 2020/21 U.S. ending stocks are up 1.2 billion bushels from last year and if realized would be the highest since 1987/88.
- Soybeans: The soybean crop is projected at 4.125 billion bushels, up 568 million from last year on increased harvested area and trend yields. Despite lower beginning stocks, soybean supplies are projected up 5% from 2019/20 to 4.720 billion bushels. U.S. soybean exports are forecast at 2.050 billion bushels, up 375 million from the revised forecast for 2019/20. U.S. ending stocks for 2020/21 are projected at 405 million bushels, down 175 million from the revised 2019/20 forecast.
“I went into the report most interested in watching the change in total Chinese soybean import number,” says Jarod Creed, owner of JC Marketing Services. “The 2019/20 marketing year saw an increase to 92 million metric tons of soybean imports with 2020/2021 estimates starting at 96 million metric tons. That gets us back on track to where we were a few a years ago prior to trade war and ASF for total Chinese bean imports. So, we have that working in the right direction.”
USDA won’t change corn and soybean acres or yields until its June report. Just how big the corn and soybeans crops are will have a major influence going forward.
“I do think corn acres will shrink as we go through the year,” says Jim McCormick, hedging strategist with AgMarket.net. “So hopefully we're seeing some of the worst supply numbers of the year with this report right now.”
McCormick says USDA lowered the ethanol demand by 100 million, but they raised exports, which is a good sign.
“I think that shows them they're optimistic China's going to come in and do some more buying,” he says. “The price of corn in China right now is at a five-year high. The price of corn in the U.S. is at a 10-year low. Economically it makes a lot of sense for China to come in and buy our grain.”
For new-crop demand, McCormick says USDA was aggressive with its estimates.
“It is going to be an awful high hill to slide up unless we can get this pandemic under control very, very fast,” he says.
Creed agrees: “At this point, it seems like demand is stretched pretty hard given the big production number forecasted. Production could change by nothing to as high as 750 million bushels depending on planted acres. The same is true for soybeans.”
From a soybean standpoint, Creed says a few friendly factors are at place. The carryout is manageable, and China is importing more beans.
“But in the background, we have the headwind of continued expansion in South America, so competition will stay fierce,” he says.
For corn, today’s report provided a little reprieve from the recent steady stream of negative factors.
“The corn market has been shown a significant amount of negative news over the last couple months,” Creed says. “Barring dramatic changes to planted acres and yield, corn could still have downside risk given the dramatic increase in carryout. We will see adjustments to corn acreage number, but I’m not confident enough to say it can make a bullish environment.”
USDA pegged the 2020/21 U.S. season-average corn price at $3.20 per bushel, down 40 cents from 2019/20 and the lowest since 2006/07. For soybeans, the projected price is $8.20 per bushel, down 30 cents from 2019/20.
“The uncertainty in livestock markets related to coronavirus definitely throws a little bit of negative shade over feed grain,” Creed says. “There is still lots of concerns around long-term demand in both from perspective of COVID-19. The market needs to build momentum of good news.”