This year has been far from normal. As such, what we normally learn with each round of USDA reports has to be viewed through 2019’s unique circumstances.
USDA delivered its nearly final corn and soybean report in November and won’t change the supply side of the balance sheet again until the Annual Production Summary on Jan. 10.
Tighter Corn Supplies?
As of Nov. 10, about one-third of the 81.8 million acres of corn hadn’t been harvested. That’s about 4.5 billion bushels. Harvest remains slow with moisture levels stubbornly high and LP supplies in the Upper Midwest shockingly low. As a result, the supply side of the balance sheet will be debated for months. Here are the highlights for corn:
- Competition for corn exports had expected exports down 215 million bushels from last year and down 600 million bushels from two years ago.
- Total corn use is down 560 million bushels from 2018 and down 880 million bushels from two years ago.
- Stocks-to-use ratios stood at 14.5% in 2017/18; 14.6% in 2018/19; and is expected to slip to 13.7% in 2019/20.
The trend is in the right direction on stocks-to-use, but it’s still not tight enough to see the national average cash price top $3.85, as projected by USDA.
On the demand side, it’s tempting to say USDA has cut demand too deeply from 2018. Smaller supplies and bigger demand would increase prices, but not until the stocks-to-use ratio nears 12%.
Beans Face Demand Questions
USDA held its soybean estimate steady from October to November. Here are the highlights for soybeans:
- The stocks-to-use ratio for soybeans stood at 10.2% in 2017/18, ballooned to 23% last year and is projected to slide back to 11.9% in 2019/20.
- Total use is up 40 million bushels from last year, but down 290 million bushels from two years ago.
Bean prices two years ago averaged $9.33 at that stocks-to-use ratio, which supports the $9 estimate for this year.
The demand side for beans faces major uncertainty. If “phase 1” of a Chinese trade deal includes big purchases of U.S. ag goods, pork and beans should top the list, pushing bean use higher.
However, the stocks-to-use ratio for beans doesn’t turn price friendly until it slips under 8%, which would take a 150-million-bushel jump in demand with a 150-million-bushel drop in carryover. That seems unlikely.
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