May 13, 2019
MAY 10 WASDE REPORT PROJECTS LOWER GRAIN PRICES
The USDA World Agricultural Supply and Demand Estimates (WASDE) Report released on May 10 increased the projected 2018-19 U.S. corn and soybean ending stocks. The Report was regarded as mainly “bearish” for both the corn and soybean markets in the coming months, which added more downward pressure to near term grain markets. The 2018-19 marketing year runs from September 1, 2018 to August 31, 2019. The WASDE Report also provided an initial look at estimates for the 2019-2020 marketing year, which showed high levels of both corn and soybean ending stocks for 2019-20. The early 2019-20 ending stocks projections, together with the struggling trade negotiations, will likely be a negative for any longer-term improvement of corn and soybean prices. Following are some highlights of the latest USDA WASDE Report:
According to the May 10 USDA WASDE Report, the projected corn ending stocks for the 2018-19 year, which ends on August 31, 2019, are estimated at 2.095 billion bushels, which was increased by 60 million bushels compared to the April Report. The projected corn ending stocks are 40 million bushels above the average grain trade estimate. The 2018-19 level of corn ending stocks would still be a slight decline from 2.14 billion bushels in 2017-18. USDA is projecting that total U.S. corn use for 2018-2019 will be 14.5 billion bushels for livestock feed, ethanol, food products, seed, exports, etc., which is a decrease of about 300 million bushels from the 2017-18 level. The decrease in corn usage was due to a decline in the projected corn exports, as well as less corn used for ethanol production.
The May WASDE Report offers an initial USDA estimate for ending stock levels in the year following the 2019 crop that is currently being planted. USDA is projecting corn ending stocks to increase to 2.485 billion bushels, which represents an increase of nearly 19 percent from estimated 2018-19 corn carryover levels, by the end of the 2019-20 marketing year that ends on August 31, 2020. This would be the highest level of corn ending stocks since 1987-88. USDA is projecting total corn usage at 14.675 billion bushels for 2019-20, which would be a slight increase from 2018-19 estimated corn usage. USDA is forecasting increased usage levels for feed and ethanol production in 2019-20; however, further declines in U.S. corn export levels are predicted.
USDA is estimating total U.S. corn production for 2019 to be at 15.03 billion bushels, which would be an increase of approximately 4 percent from 2018 corn production and would be near the record U.S. production in 2016. The USDA Report expects an estimated 92.8 million acres will be planted to corn in the U.S. in 2019, which compares to 89.1 million acres in 2018, and 90.2 million acres in 2017. USDA is estimating an average U.S. corn yield of 176 bushels per acre in 2019, compared to 176.4 bushels per acre in 2018 and a record yield of 174.6 bushels per acre in 2017. One “wild card” in the USDA estimated 2019 corn production might be any impacts that the late planting in the Midwest has on final planted corn acreage and final average yields.
USDA is estimating the average U.S “on-farm” corn price for the 2018-19 marketing at $3.50 per bushel, which was a decline of $.05 per bushel from the April WASDE estimate. The current USDA projected corn price compares to the final national average prices of $3.36 per bushel for 2017-18, $3.36 per bushel for 2016-17, $3.61 per bushel for 2015-16 and $3.70 per bushel for 2014-15. The first projected average corn price for the 2019-20 marketing year was set at $3.30 per bushel, which would be the lowest market year average price since 2006.
According to the May 10 WASDE Report, the projected soybean ending stocks for 2018-19 are estimated at 995 million bushels, which is an increase of over 11 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 about 75 million above the average projections by grain marketing analysts. The projected 2018-19 U.S. soybean ending stocks level are 2.25 times higher than the soybean carryover level of 438 million bushels for 2017-18 and will be at the highest level ever recorded.
Total soybean usage for 2018-19 is estimated to be just over 4 billion bushels, which compares to nearly 4.3 billion bushels estimated for 2017-18. The reduced soybean demand is primarily due to a projected decrease of 354 million bushels for soybean exports in 2018-19, mainly resulting from the stalled trade negotiations with China. Some observers feel that the final 2018-19 U.S. soybean export numbers may be lowered even further, due to continuing stalemate in trade negotiations with China. USDA projected a slight increase in the bushels used for soybean processing in the U.S for 2018-19.
The May WASDE Report projects soybean ending stocks to remain quite high for the 2019-20 marketing year at 970 million bushels; however, this would be a slight decrease of 25 million bushels from the estimated 2018-19 carryover levels. Total U.S. soybean production in 2019 is estimated at 4.15 billion bushels, which would be down from the record U.S. soybean production of 4.54 billion bushels in 2018 and the 4.41 billion bushels produced in 2017.
Planted soybean acres for 2019 are projected to decline by over 5 percent to 84.6 million acres, which compares to 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 49.5 bushels per acre in 2019, which compares to 51.6 bushels per acre in 2018, 49.3 bushels per acre in 2017, and the record U.S. soybean yield of 52.1 bushels per acre in 2016.
USDA is estimating the U.S “on-farm” soybean price for the 2019-20 marketing year at an average price of $8.10 per bushel, which would be considerably lower than recent years and would be at lowest level since 2006. The projected $8.10 per bushel soybean price compares to the current 2018-19 estimated average soybean price of $8.55 per bushel, as well as the final average soybean prices of $9.33 per bushel for 2017-18, $9.47 for 2016-17, $8.95 per bushel for 2015-16, and $10.10 per bushel in 2014-15.
The 2019-20 USDA soybean price estimate is based on a projected increase in total soybean usage of 191 million bushels from current levels, which is largely being driven by anticipated increases in soybean export levels. Many analysts fear that the major outbreak of “African Swine Fever” disease in China could significantly lower China’s needs for soybean imports in the coming year. This fact, together with the struggling trade negotiations between the U.S. and China, is likely to continue putting increased downward pressure on 2019-20 soybean prices.