Armed with a planting survey from March, USDA is about to issue a new round of supply estimates that will be matched with coronavirus-damaged demand estimates for both old-crop and new-crop grains. USDA's resulting price estimates are not expected to be good news for producers.
For those squeamish about bearish estimates, you may not want to read this section on corn. There is just not much to be bullish about.
It has already been a month since the April World Agricultural Supply and Demand Estimates (WASDE) report, and we can't say there has been much improvement in the ongoing battle against the coronavirus. U.S. death totals are volatile from day to day, and we can't confidently say yet that things are getting better.
As a nation, we are starting to get out more. Department of Energy statistics show weekly gasoline demand up 32% from the low in early April. You may wonder what the coronavirus has to do with WASDE reports, but Tuesday's new demand estimates are apt to be lower for corn and soybeans due to the virus and its stay-at-home prescription. Livestock production estimates are also likely to be cut and that will lead to probable reductions in feed demand.
Dow Jones' survey of analysts expects USDA to estimate a 15.609 billion bushel (bb) corn crop in 2020-21, resulting in 3.403 bb of U.S. corn stocks at the end of the season. The surplus is much larger than the 2.225 bb of corn stocks expected for the current season and suggests a bearish 24% stocks-to-use ratio in 2020-21. USDA may not lower its average farm price estimate to $2.50 a bushel, but that is where cash corn prices traded the past 23 years the few times corn stocks neared 24% of use.
A slight bullish hope may be that 97.0 million acres of corn probably won't be planted in 2020 as USDA's March survey said. USDA will also provide the results of a second harvest survey of corn and soybean production in 2019, conducted for northern states in late April. North Dakota is the one state that has not yet been surveyed, and USDA is expected to provide those results later.
The larger threat to corn prices in 2020 is coming from the demand destruction that the coronavirus is wreaking on the ag economy. Those estimates simply aren't clear at this time and the longer the problems last, the more bearish the outcome will be. In the case of corn, crop insurance and the farm programs will be essential protections in 2020.
It is difficult to take world estimates of corn seriously for the 2020-21 season right now as South American crops are five months away from being planted, but the 2019-20 estimates are interesting. Dow Jones expects USDA to increase its estimate of world ending corn stocks for 2019-20 from 303.2 million metric tons (mmt) to 307.5 mmt or 12.11 bb in May. Dow Jones' survey expects a 99.2 mmt (3.91 bb) corn crop for Brazil and a 49.5 mmt (1.95 bb) corn crop for Argentina.
For soybeans, the surplus outlook is not nearly as bearish as it is for corn and that could have enticed more acres toward soybeans since USDA's March planting survey was taken, but maybe not enough acres to significantly change the overall mix.
Dow Jones' survey anticipates a soybean crop estimate of 4.12 bb in 2020, resulting in 452 mb of U.S. soybean stocks at the end of 2020-21. If true, the ending stocks-to-use ratio of 11% suggests an average cash soybean price around $9.50, well over a dollar higher than current prices. Ending soybean stocks for 2019-20 are expected to increase from 480 mb to 501 mb in May.
However, the slight bullishness has to be tempered by the unusual situation that the coronavirus has presented, as demand estimates are also tenuous for soybeans. The one positive that can be said for soybeans is that they don't have the same level of demand vulnerability in the current market environment that corn does. The negative is that Chinese purchases, or the lack thereof, can break the soybean market and trade relations with China remain sketchy -- even hostile at times.
Dow Jones expects USDA to keep its estimate of 2019-20 world soybean stocks roughly unchanged at 100.1 mmt (3.68 bb) in May. The recent soybean harvest is expected to total 122.9 mmt (4.52 bb) in Brazil, a new record high by a slim amount. Argentina's soybean crop is expected to total 51.1 mmt (1.88 bb), down 8% from last year and restrained by a higher, 33% export tax.
Wheat is one grain that has held its value relatively well through this difficult time. Dow Jones' survey expects a modest reduction in U.S. ending wheat stocks in the new-crop season. Analysts look for USDA's estimate of ending U.S. wheat stocks to drop from 972 mb in the current season to 821 mb in the new season, helped by less production and relatively stable demand.
Dow Jones expects the crop production report from the National Agricultural Statistics Service (NASS) to estimate all wheat production at 1.859 bb in 2020, down from 1.920 bb a year ago. The winter wheat crop is expected to total 1.255 bb, down from 1.304 bb in 2019.
In the new 2020-21 season, USDA is expected to estimate world ending wheat stocks at 292.8 mmt (10.76 bb), roughly the same as ending wheat stocks in the current season.
Tuesday's report is one early step in a new-crop season with plenty of uncertainty ahead. Join us for a post-report webinar at noon, CDT on Tuesday, May 12, as we explain USDA's new estimates and what it should mean for prices. We'll also discuss possible flaws in the report and try to answer your questions. Register now at:
|U.S. ENDING STOCKS (Million Bushels) 2019-20|
|U.S. ENDING STOCKS (Million Bushels) 2020-21|
|WORLD ENDING STOCKS (Million metric tons) 2019-20|
|WORLD ENDING STOCKS (million metric tons) 2020-21|
|WORLD PRODUCTION (million metric tons) 2019-20|
|U.S. PRODUCTION (million bushels) 2020-21|
Todd Hultman can be reached at email@example.com
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