June 10 WASDE Report confirms tight corn supply
The USDA World Agricultural Supply and Demand Estimates (WASDE) Report released on June 10 lowered corn ending stocks and increased soybean carryout numbers from the May estimates. The number of 2020 planted corn and soybean acres, the national average yields, and the estimated total 2021 production of both crops were unchanged from the May estimates. The downward adjustment in the corn ending stocks was greater than was expected by most grain marketing analysts and the increase in soybean supplies surpassed the expectations of most grain traders.
Most grain marketing analysts generally viewed the June WASDE Report as somewhat “bullish” for the corn market and generally “bearish” for soybeans; however, there is a high degree of uncertainty for both crops. The price projections in the WASDE Report are for the 2020-21 and 2021-22 marketing years. The marketing year for 2020-21 began on September 1, 2020, and ends on August 31, 2021, and the 2020-21 marketing year ends begins on September 1, 2021, and ends on August 31, 2022. In the first few days since the June WASDE Report, Chicago Board of Trade (CBOT) soybean futures have been down sharply and corn futures have been mixed.
Following are some highlights of the June 10th USDA WASDE Report:
USDA decreased the corn ending stocks by 150 million bushels for the current 2020-21 marketing year, which ends on August 31, 2021. This decrease was based on a projected increase of 75 million bushels each in corn used for ethanol production and in 2020-21 corn export levels, primarily being driven by strong export demand for U.S. corn by China. The projected corn ending stocks for 2020-21 are estimated at 1.107 billion bushels, which would be at the lowest level since 2012-13. The 2020-21 corn ending stocks estimate compares to 1.92 billion bushels in 2019-20, 2.19 bushels in 2018-19, and 2.14 billion bushels in 2017-18. The projected tight corn supply for the balance of the 2020-21 marketing year is likely to maintain strong support for “old crop” corn prices. Farmers with some of last year’s corn still in storage will want watch for rallies in local cash corn bids in the coming weeks to take advantage of the very favorable cash corn prices.
USDA kept the projected total estimated 2021 U.S. corn production at 14.99 billion bushels, which was the same as the May WASDE Report. The 2021 estimate compares to 14.18 billion bushels in 2020, 13.6 billion bushels in 2019, and 14.4 billion bushels in 2018. The current record U.S. corn production of 15.15 billion bushels in 2016. The projected U.S. corn yield in the June Report for 2021 is a record yield of 179.5 bushels per acre, which is the same as the May estimate. The 2021 yield projection compares to other recent national average corn yields of 172 bushels per acre in 2020, 167.4 bushels per acre in 2019, 176.4 bushels per acre in 2018, and the previous record yield of 176.6 bushels per acre in 2017.
The WASDE Report projects 2021 planted corn acres in the U.S at 91.1 million acres and harvested acres at 83.5 million acres, which compares to harvested acres of 82.5 million acres in 2020 and 81.3 million in 2019. Based on the increase in U.S. corn acreage and the expected record national average corn yield, USDA is projecting a slight increase in the corn ending stocks by the end of the 2021-22 marketing year on August 31, 2022, as compared to 2020-21 carryout levels. The 2021-21 carryover is estimated at 1.357 billion bushels which was a decrease of 150 million bushels from the May estimate and is quite tight compared to June estimates in recent years. Many analysts anticipate that the total 2021 U.S. corn acreage and harvested acreage will be adjusted upward in the June 30 USDA Crop Acreage Report, which could increase future corn supply estimates and put downward pressure on “new crop” corn prices. Of course, the other “wild card” on the corn production side is the worsening drought conditions in many portions of the Northern Corn Belt, which could strengthen corn prices.
The June 10 WASDE Report left the projected average U.S “on-farm” corn price for the 2021-22 marketing year at $5.70 per bushel, which is unchanged from the May estimate. USDA also left the 2020-21 corn price unchanged from the May estimate at $4.35 per bushel. The most recent USDA corn price projections are considerably higher than the final national average corn prices of $3.56 per bushel for 2019-20, $3.61 per bushel in 2018-19, and $3.36 per bushel for 2017-18. The current expected corn prices for the 2020-21 and 2021-22 marketing years would result in no estimated PLC payments in either year for the FSA farm program on corn base acres. Producers in counties that had reduced corn yields in 2020 could potentially see a small 2020 corn ARC-CO payment. Corn price movements have been mixed since the June 10 report. Local cash corn prices in Southern Minnesota remain near $6.50 per bushel at many locations, with “new crop” corn bids near $5.50 per bushel.
Based on the June 10 WASDE Report, the projected soybean ending stocks for 2020-21 were increased by 15 million bushels. The updated 2020-21 estimated soybean carryout level of 135 million bushels is still well below the carryover levels of 525 million bushels in 2019-20, nearly 1 billion bushels in 2018-19, and 438 million bushels in 2017-18.
USDA unexpectedly decreased the soybean crush level for the current year by 15 billion bushels in the June estimates; however, soybean exports remained unchanged for 2020-21. The soybean ending stocks for 2021-22 are now estimated at 155 million bushels, which is also an increase of 15 million bushels from the May estimate; however, it should be noted that the 2021-22 ending stocks figure includes a decrease of 205 million bushels in soybean exports from the current 2020-21 export levels. The U.S. soybean export levels have largely been driven by significant soybean sales to China, which have not shown any signs of slowing down at this point.
One “wild card” in the WASDE soybean estimates for 2021-22 may be the 2021 U.S. soybean production level. USDA left the 2021 planted soybean acres at 87.6 million acres and projected U.S. average soybean yield at 50.8 bushels per acre, which are the same as the May estimates. Some experts feel that U.S. soybean acreage could be increased significantly in the June 30 USDA Crop Acreage Report and that the national average soybean yield may be adjusted upward in future months, if there are favorable growing conditions this Summer in many portions of the Midwest. Of course, further development of drought conditions over a large area of the region could also reduce the anticipated 2021 total U.S. soybean production and potentially strengthen “new crop” soybean prices in the coming months.
The June 11 WASDE Report estimated the average U.S “on-farm” soybean price for the 2021-22 marketing year at $13.85 per bushel, which the same as the May estimate. USDA is now estimating the average soybean price for the 2020-21 marketing year, which ends on August 31, 2020, at $11.25 per bushel, which is also the same as the May estimate. The latest USDA soybean price projections are considerably higher than recent national average soybean prices of $8.57 per bushel for 2019-20, $8.48 per bushel for 2018-19, and $9.33 per bushel for 2017-18.
Soybean prices have been sharply lower since the June 10 WASDE Report was released. Nearby CBOT soybean futures were trading $14.80 per bushel on the morning of June 14, which was about $.80 per bushel lower than a week earlier. November “new crop” soybean futures were trading at just above $14.00 per bushel. Cash soybean prices at local grain markets also declined by nearly $.80 per bushel from June 7 to June 14; however, “old crop” prices are still above $14 per bushel at many locations. New crop soybean prices in Southern Minnesota were generally $13.00 to $13.50 per bushel on June 14, as compared to near $8.15 per bushel in mid-June of 2020.
Kent Thiesse is a Farm Management Analyst and Senior Vice President of MinnStar Bank