Marketing Updates Newsletter

Soybeans
25 Feb 2020

Farmers and ranchers everywhere are awaiting to see what 2020 projections look like from the United States Department of Agriculture. Below is a discussion of the 2020 Ag Outlook forum.  This report isn’t really set in stone, but it’s the first look at what USDA is thinking of for the 2020 crop year.  These numbers are used as part of the budgeting process, so this is how USDA sets aside money for the farm programs, etc.  As part of that process, they hold a two-day meeting in Washington, D.C. to go over outlooks for the ag economy in general and then drill down to more commodity-specific data. It’s also important to note that USDA assumes “normal” weather, so the impact of Prevent Plant on planting intentions is assumed to be minimal at this time.  That could change in later WASDE reports, but right now USDA is projecting we return to 224 million planted acres - a level just below 2018.

 Commodity Current 2019 WASDE Projected Price Current 2020 Projected Price  Change

 Wheat

 $4.55  $4.90  +$0.35
 Corn  $3.60  $3.85  +$0.25
 Soybeans  $8.75  $8.80  +$0.05
 Soybean Meal  $305/ton  $310/ton  +$5/ton
 All Milk Price  $18.60/cwt  $18.85/cwt  +$0.25/cwt
 5 State Steer Price  $116.78/cwt  $117.00/cwt  +$0.22/cwt
 Feeder Cattle  $142.23/cwt  $146.00/cwt  +$3.77/cwt
 Hog Price - live  $47.95/cwt  $49.00/cwt  +$1.05/cwt
 Broilers  $0.89/lbs  $0.87/lbs  -$0.02/lbs
 Turkeys  $0.89/lbs  $1.01/lbs +$0.12/lbs
 Eggs  $0.94/dzn  $1.00/dzn  +$0.06/dzn

 

Planting Projections (million acres)

   2016  2017  2018  2019  2020  % Change from Last Year
 Wheat  50.1  46.1  47.8  45.2  45.0  0.5% decrease
 Corn  94.0  90.2  88.9  89.7  94.0  4.7% increase
 Soybeans  83.5  90.2  89.2  76.1  85.0  11.7% increase

 

Wheat (all classes)

USDA is anticipating a small change in planted area but probably well within the margin of error to remaining flat.  Area harvested as a percentage of planted increases, but just to a return to normal after last year’s wet spring.  Yield is expected to fall to 48.2 bu, which is the trend line for 2020.  Accordingly, production drops by 84 million bushels.  That, combined with the lower projected carry in from 2019 (currently at 940 mbu), results in total supply that’s down marginally from last year. If this holds true, it would be the lowest since 2017.  

Usage is still pretty flat.  There’s a small projected drop in feed usage due to cheaper corn projections. On the food side, usage has a marginal increase while exports remain flat.  The ending stock estimate is 777 mbu with a stocks to use ratio of 36.3%.  At 777 mbu, we would have the lowest carryout since 2014 with roughly the same stocks to use. Projected price for 2020 increases to $4.90 from $4.55 in 2019.

Corn
Assuming a return to regular weather, USDA is looking for planted corn acres of 94 million with a trend line yield of 178.5 bu/ac. Record or near record plants multiplied by record yield obviously would equal record production. In this case it’s 15.4 bbu.  The previous record was 15.1 bbu in 2016.  That puts total supply for the 2020 crop year at a whopping 17.3 billion bushels - an 8.3% leap over 2019. 

Usage remains steady with a 400 mbu increase in exports.  Ethanol production is flat, with USDA noting that that gasoline consumption is not expected to change much.  Unfortunately, that leaves carryout at 2.637 bbu and a stocks to use ratio of 17.9%.  Bushel-wise, that’s the biggest stocks since 1987, but that’s a little misleading for a number of reasons.  In terms of stocks to use, it’s the highest since 2004.  The good news is projected price is expected to hold up well and is pegged at $3.60.  That’s a 25 cent drop from where USDA is currently projecting the 2019 crop.

Soybeans
Soybeans probably have the most constructive balance sheet direction but price projections show minimal change.  USDA sees soybeans gaining significant ground due the assumed drop in PP acres.  Plantings are estimated at 85 million acres compared to 76.1 in 2019.  This is, however, still less than 2017 and 2018.  Yields are put at a trend line of 49.8 bu/ac for total production of 4.195 bbu.

Usage is constructive with a slight increase in crush. Exports are anticipated to be higher even though the USDA was clear that they are not really figuring in the Phase One trade agreement. The Chief Economists projections show an increase of in demand of 256 mbu.  That leaves a projected carryout of 320 mbu - slightly higher than what we saw in 2016 with a similar stocks to use ratio.  Price projections, likely because of pressure in competing commodities, are flat at $8.80/bu.

We’ll continue to provide more analysis once additional USDA projections and reports are released. 

 

Katie Miller
Written By: Katie Tangen
Marketing Education Specialist