Inside The Market

A New Season Approaches

I don’t mean to start on such a controversial note, but I’m extremely disappointed with Punxsutawney Phil this year. Instead of the early spring he promised, as I write this I am looking out a window where the snow is flying by and somewhere up to 9 inches are expected by morning.

In Washington D.C., a winter storm closed federal offices the day before USDA held its annual Agricultural Outlook Forum, in Arlington, Virginia, on Feb. 21 through 22. The show did go on as promised. Winter aside, spring will eventually arrive, and USDA reminded us once again that it is time to consider what 2019 might look like for grain prices and supplies.

Before diving into this year’s new-crop estimates, I should note that USDA’s February ritual underestimated production five years in a row for corn and six consecutive years for soybeans. The amounts of the misses were usually modest except for in 2016, when USDA’s corn crop estimate was 1.32 billion bushels (bb) too low, and the soybean crop estimate was short by 486 million bushels (mb). Weather, of course, is the typical culprit for such errors as USDA starts the year with trend-line yields.


For 2019, USDA estimates a corn yield of 176 bushels per acre (bpa) on 92 million acres (ma) of plantings, the largest area for corn in three years. A 14.89 bb crop and 15.015 bb of U.S. demand are expected to result in slightly lower ending stocks of 1.65 bb, or 11% of annual use. $3.65 a bushel is USDA’s expected average farm price in 2019-20, a little higher than prices have averaged the past four years.

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With much of the Corn Belt starting the year with saturated soils, and winter taking its sweet time, planting season may be corn’s biggest challenge in 2019. If there is a weak spot in USDA’s outlook, it may be underestimating the difficulty of planting 92 ma of corn this spring. Given early conditions, the under on corn acres looks more likely.


For soybeans, USDA expects a 4.175 bb crop based on a smaller planting of 85 ma and yield of 49.5 bpa. Still hampered by trade uncertainty with China at the time of the forum, USDA admitted that estimating exports “remains challenging” and pegged ending U.S. soybean stocks at 845 mb for 2019-20.

USDA’s average farm price estimate of $8.80 per bushel is generous for soybeans anticipating only a small reduction from record ending supplies of 910 mb in 2018-19.

At the time of this writing, trade relations with China appear to be thawing, and U.S. Ag Secretary Sonny Perdue tweeted that China agreed to buy another 10 mmt (367 mb) of soybeans--just the kind of help U.S. soybeans are going to need more of in 2019 to return to more normal supply levels.

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