Today’s World Agricultural Supply and Demand Estimates (WASDE) report from USDA sent shockwaves through the market. With corn prices seeping lower, traders and farmers alike are reeling from the numbers.
“New crop corn carryout was way over the highest expectation,” said Chip Nellinger, Blue Reef Agri-Marketing, to U.S. Farm Report Host Tyne Morgan. “The 176 bu. per acre yield—I’m betting the under on that.”
The 2019-20 corn crop is projected to reach 15.0 billion bu., up from last year and the second largest on record. Total corn supplies are forecasted at 17.2 billion bu. with the season-average farm price at $3.30 per bu. This is down 20 cents and the lowest since 2006-07 marketing year.
“The one thing that I think the market is missing is they’re assuming with this five, six-day weather window that we’re just going to slam a lot of seed in the ground,” Nellinger said. “And that’s not the case.”
After polling its Midwest customers this past week, even farmers in the driest areas need until Tuesday or Wednesday of next week to finish up planting corn, he added. Some of those farmers expected it could take up to Friday—when it’s going to start raining again.
“We’re not going to get nearly as much planted this coming week as what the market expects,” Nellinger said. “Don’t panic into a sale at or near the lows that you know, with one Tweet, you can regret.”
Speaking of Tweets, President Trump enacted $325 billion additional tariffs on Chinese goods at 12:01 a.m. Friday, May 10. The ongoing trade war has wreaked havoc on farm country—namely soybean prices.
We need to cut 10 million-plus soybean acres to get back to higher prices, said Arlan Suderman, with INTL FCStone. “And that’s likely not going to happen.”
The 10 million acres is needed if farmers maintain the high yields experienced in the past few years, Suderman noted. Weather concerns, delayed planting and any potential production issues could change that number.
However, Suderman said the markets aren’t giving enough credit to African swine flu (ASF) and its erosion on soybean demand.
“USDA has failed to tell the accurate story of ASF and what’s it doing to demand destruction on soybeans over the last six months,” Suderman said. “It has not given farmers the information they needed to anticipate what was going to happen.”
While ASF has decimated soybean demand, Suderman and Nellinger both feel optimism for corn demand, including Chinese demand.
“There may be less need for feed looking at soybeans, so that’s lower potential there,” Suderman said. “But corn prices in China are still strong, basis is strong, they’re still feeding hogs with corn and they’re producing more ethanol.”
Even with a trade deal, the two analysts expect soybean acres still need to be trimmed by about 10 million acres because of excess supply combined with this low demand.
USDA estimates the 2019-20 crop will hit 4,150 million bu., down from last year’s record crop. However, stocks are sharply higher and projected at 5,165 million bu., up 3% from 2018, 2019. The season-average soybean price is projected at just $8.10 per bu., down 45 cents from last year’s forecast.
“I think it’ll be a surprise and shock [when the China deal goes through], given what’s happened in the last three months with negotiations,” Nellinger said. “It’s just frustrating.”