Corn and soybean demand continues to struggle
By KRISS NELSON
Agree with them or not, the acreage numbers released by USDA last week will be an important part of every World Agricultural Supply and Demand Estimates (WASDE) reports for the rest of the year.
“Looking at USDA’s estimates for planted acreage and the June 1 grain stocks – this is always an important report every year,” said Todd Hultman, DTN grain market analyst.
After the report was released, Hultman said corn and soybeans traded double digits higher. This upswing in prices he said came from planting estimates that were lower than expected.
“As tough of a year for planting conditions was in 2019, and as critical as I was of USDA’s acreage estimates a year ago, I do have to acknowledge this tends to be a fairly accurate report,” said Hultman.
For 2020, Hultman said corn is still the crop choice of favor, with 92 million acres estimated to have been planted.
“This is up from a year ago, but less than the 94.8 million acres the market was expecting,” he said.
Soybean acres are estimated at 83.8 million acres.
“That’s a big bounce back from a year ago,” he aid. “But, it’s also about a million acres less than the trade was expecting to see today.”
Planted wheat acres are 44.3 million acres, which Hultman said is also slightly less than expected.
“It is the lowest planting of wheat for the United States on record going back to 1919,” he said.
The real stunner, Hultman said is the three crop total. Corn, soybeans and wheat acres for 2020 come in at 220.1 million acres -only up 9 million acres from last year.
“If you recall, we had a 13 million acre drop in soybeans alone,” he said. “A lot of the acres lost last year did not come back. Or I should say at least in these three categories.”
Two years ago, before the big planting disruptions in 2019, the three crop total, according to Hultman was at 225.9 million acres which is roughly 6 million acres from 2020 estimates from corn, wheat and soybeans.
What is making up for that loss in acres?
“We did notice that when it comes to other crops, like sorghum, barley, oats, peanuts -those types of smaller crops, we did see a gain in that grouping of roughly almost 2 million acres, so that is at least part of it that we can explain for right now,” he said.
As a state by state breakdown, Iowa is still the leader among corn acres with an expectation of 14 million acres planted this year. Illinois comes in second at 10.9 million acres.
“Those are up modestly from a year ago,” said Hultman.
North and South Dakota had an interesting change in corn acres.
South Dakota increased by slightly over a million acres from a year ago, where North Dakota gave up on planting corn this year, dropping 3.5 million acres last year and 2.4 million acres this year.
“They had a very tough harvest experience of having to leave crops in the field over the winter last year,” he said.
How do these planting estimates affect prices overall?
Instead of a 16 billion bushel (bb) corn crop, Hultman said with USDA’s current yield estimates, there is potential of a 15.3 bb crop, which took about 700 million bushels (mb) off the ending stocks to use estimate.
“Today’s lower planting estimate does help reduce the production estimate for this year’s corn,” he said. “The old record is just under 15.2 billion bushels. We are still looking at the slight possibility of a record crop, depending on how the weather goes for the rest of the summer.”
The ending stocks to use ratio is roughly 19% which was 22% before the report was released.
“We are still looking at cash corn prices below $3,” said Hultman. “It’s a little supportive, but not a big change in the overall fundamental sketch of the moment. Weather will have the final say.”
The soybean acre estimate of 83.8 million acres is up from 76.1 million acres from 2019 and about a million acres less than expected.
“We did not recover anywhere near the 13 million acre loss we saw last year,” said Hultman. “That is still quite a drop of soybean acres compared to two years ago.”
Illinois planted the most acres to soybeans at 10.4 million acres with Iowa coming in second at 9.4 million acres.
The acreage estimate for soybeans, Hultman said gives a crop estimate of 4.15 bb based on a 50 bushel to the acre yields.
The ending stocks to use ratio was roughly unchanged at 9% for the new crop season.
“What remains remarkable is that if that holds true and we do have ending stocks that low in the new crop season, it points to a $10 cash price,” he said. “But, of course, we have a couple things in the way. One is the Coronavirus concerns and the other is trade relations with China. Those are two big questions marks that are keeping prices suppressed at this time.”
June grain stocks report
Hultman said the acreage report could be considered more on the bullish side whereas the June 1 grain stocks reflected a more bearish side of the report.
The June 1 grain stocks reflect demand in the previous quarter.
“As you know, the previous three months has been a very tough time for grain demand -corn, soybeans and wheat all together because of the hit of the Coronavirus situation and the results that it had in locking down the economy,” he said.
The June 1 corn stock total was expected at 4.99 bb, but came in higher at 5.224 bb.
“That is even up slightly from a year ago and that was definitely more than expected,” said Hultman. Given our understanding how ethanol production was sharply reduced during this period, feed demand was a concern. We knew this before – our corn exports had been suffering in this 2019/2020 season and that continues to be true.”
For the third quarter, corn demand totaled 2.73 bb, which is the lowest in seven years.
Hultman said tallying all three quarters of the current season, it comes to 10.74 bb, which is the lowest corn demand for that time in four years and is very close to the lowest seen in seven years.
“It is a very tough time for our corn demand,” he said. “That is really one of the tough difficulties that are weighing on our corn prices this year.”
The soybean stocks, Hultman said is not such a bearish number: 1.386 bb was very close to expectations and down from 1.78 bb a year ago.
“There is no surprise on the soybean side,” he said. “If anything, maybe a relief it wasn’t worse and didn’t look more like corn did.”
The last three quarters of soybean demand is just under 3.1 bb, which is the lowest in seven years.
As for the third quarter, there was a disappearance of 867 mb.
“We have seen worse quarters than this one, surprisingly given we have been through a global pandemic and everything we are dealing with when it comes to trade with China, it is surprising soybean demand has done as well given the conditions,” he said. “Soybean demand continues to struggle as does corn demand.”
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