Combines are rolling, and we’ll soon know whether the 2018 corn and soybean crops are as big as the USDA-NASS prediction. The agency estimates total U.S. corn production at 14.8 billion bushels, with soybeans coming in at 4.7 billion bushels. The estimates are a little higher than what scouts found in the field during our annual Pro Farmer Midwest Crop Tour in August.
If big crops are realized they, along with current demand, signal what we can expect in 2019, says Chip Flory, Farm Journal economist and “AgriTalk” and “AgriTalk After the Bell” host. (Download the “AgriTalk” app to listen on demand.)
“The soybean-to-corn price ratio has been as low as 2.25:1 this year. That’s the market’s attempt to encourage more corn acres for next year,” Flory says. “And with the globe consuming more corn on an annual basis than we’ve produced in back-to-back years, there is a need for more.”
But instead of corn having to bid for soybean acres, the soybean market is currently willing to give up acres for 2019 due to the tariff situation with China, high existing stocks and market uncertainty. “If those were eliminated, the soybean market would certainly get a lift, and corn might be forced to actively bid for acres then, providing an additional lift in the price outlook,” Flory says.
If we are still dealing with tariffs next spring, expect soybean prices to fall and little improvement for corn. “That would equal very little lift for the corn market, more acres and more production than consumption in the 2019/20 marketing year on a global basis,” Flory says. “Corn has a good fundamental story to tell right now—an extension on the soybean tariffs would threaten that story.”
Some economists predict wheat will be more in vogue next year, but Flory offers a mixed forecast. “There might be a few more winter wheat acres, with the expectation of double-cropping soybeans, to build revenue,” he says. “But the swing-acres (spring wheat in North Dakota) will be the decision to watch. With more incentive to plant corn, we could lose some spring wheat acres in 2019.”