Fundamental outlooks for corn and soybeans were reset by the June Acreage and Quarterly Grain Stocks Reports from USDA.
The agency’s survey work unveiled another 2 million acres planted to corn than indicated in the March Prospective Plantings Report and stripped 4 million acres from soybeans. June 1 grain stocks for corn also fell about 150 million bushels short of expectations with soybean stocks 16 million below trade expectations.
Price reaction was as dynamic as I’ve ever seen. Corn plunged and soybeans rocketed with the corn/soybean spread widening by more than $1 as traders prepared for a “new” trading environment with “burdensome” corn supplies and “pipeline” soybean supplies at the end of the 2023-24 marketing year.
Then came the July World Ag Supply & Demand Estimates.
Corn
- Instead of the 2 million additional acres adding roughly 350 million bushels to total supplies, the crop projection increased just 55 million bushels after USDA cut 4 bu. per acre from the national average corn yield.
- Beginning stocks for 2023-24 were also cut 50 million bushels.
- USDA made no changes to the supply-side of the balance sheet.
Instead of 300-million-bushel jump in new-crop corn carryover, traders got a 5-million-bushel bump. It’s almost as if the “big changes” didn’t even happen.
The stocks-to-use ratio for new-crop corn is projected at 15.6%. That suggests a mid- to low-$4 price. At $5 there is some yield uncertainty still in the market ... and there should be! Yield was cut 4 bu. from trendline, but at 177.5 bu. per acre it would still be a record national average. USDA says this outlook suggests a national average on-farm cash corn price of $4.80.
Soybeans
- As expected, 4 million fewer soybean acres cut the crop projection 210 million bushels.
- Unexpectedly, USDA cut 25 million bushels from old-crop use to increase 2023-24 beginning stocks by that amount.
- Total supplies were cut 185 million bushels.
- Then USDA got busy on the demand-side of the balance sheet and trimmed its estimated expansion of soybean crush 10 million bushels and slashed 125 million bushels from estimated exports.
Instead of a 150-million-bushel drop, USDA sliced “just” 50 million bushels from new-crop soybean carryover. Carryover at 300 million bushels is up from the current marketing year and is 100 million bushels more than traders expected. It’s almost as if the “big changes” didn’t even happen.
The stocks-to-use ratio for new-crop soybeans is projected at 7% but it takes a record 52-bu.-per-acre yield to get there. That could happen, which could bring back some of that lost demand. And if late-season stress strips some yield, demand estimates could work even lower as global soybean importers rely more on Brazil for supplies. This outlook suggests, according to USDA, a $12.40 average price for soybeans.
