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Where are we, and where are we headed? In this issue we will discuss the November 2019 Crop Report and a first estimate at what the 2020-21 crop marketing year may look like.
CORN
The continuous development of crop genetics and the management abilities of U.S. agricultural producers given unbelievably tough conditions, planting through harvest, will never cease to amaze me! The November USDA/NASS Crop Production Report projected the 2019 U.S. average corn yield will be 167 bu/ac. And while this is 10 bu/ac, 6%, below the record yield in 2017, it is only 7 bu/ac below the trend yield, 4%. Michigan is expected to average 151 bu/ac, 11 bu/ac below the record, 7%, and 9 bu/ac, 6%, below trend. While this is a little worse that the U.S. on average, the growing conditions in Michigan were worse than the country as a whole.
Could these projected yields change from this point on? Absolutely! These are November 1 projections, and as of November 10, only 66% of the corn acres had been harvested versus the average of 85%. And in Michigan only 33% had been harvested versus the five year average of 64%.
A summary of the supply/demand numbers are shown below in Table 1, and we will first discuss the second column, the 2019-20 marketing year. Planted acreage was up just under a million acres, but harvested acres for grain was up hardly at all. This is not surprise given the growing conditions. this put total production at 13,661 million bushels, down 759 from last year, 5.5%. Total supply was down about the same amount as both year we had very large beginning stocks, carryover.
Unfortunately, projected use is also down significantly, limiting the price effect of the lower production. Feed use and residual is expected to be down 343 million bushels, much of it the effect of smaller crop has on residual and feed efficiencies versus lower livestock numbers. Ethanol use continues to stagnate, and exports are expected to be down 215 million bushels. While the decrease in the U.S. corn crop translates into 3 Million Metric Tons, the rest of the world is expected to have an increase of 1.2 MMT, which is directly affecting our exports. One positive on the world front is that world projected 2019-20 projected ending stocks are expected to be down, mostly due to lower beginning stocks.
This puts expected use down 559 million bushels, only 204 million bushels less that the cut in supply. And it is also the decrease in projected ending stocks. And while the cut is significant, a 1,910 million bushel ending stocks is still burdensome. The ending stocks to use ratio comes in at 13.7%, down from last’s year’s 14.6%, but again, fairly high. The 2019-20 average annual price is expected to be $3.85, up from $3.61, and while a nice increase, we have less to sell, and it is still below most producers economic cost of production.
Column three in Table 1, is my first estimate of the 2020-21 corn crop marketing year. It is important to be thinking about the next crop marketing year in order to make this year’s pricing decisions. I expected producers to plant 3 million more acres of corn this next spring than last spring. As will be discussed with soybeans, this is not taking soybean acres, they will be up even more, as we would not expect the huge number of prevented planting acres. The increase in corn acres does take into account a projected higher return to corn acres than soybeans for farmers is general. This could obviously change by planting time, so an important factor to keep in mind.
Along with the trend yield given, lower than most folks use, this would put total production back over 15 billion bushels, just under the 2016 record. As seen on Table 1, use is expected to recover significantly, especially feed and exports, but ethanol is expected to be near level. These forecasts would increase ending stocks by close to 300 million bushels, and would put ending stocks to use at 15.1$5, this would lead to a 2020-21 average corn price around $3.50/bu.
WHEAT
Generally the monthly harvest time wheat production projections end with the September Small Grains Report, with the final number coming in January of the following year. However, a significant number of spring wheat acres had not been harvested as of September 1. So those areas were resurveyed. All wheat harvest acres were than lowered by about 900,000 acres. This lowered total production by 42 million bushels. Projected use was also lowered by 12 million bushels, lowering projected ending stocks by 30 million bushels. See the numbers in the second column of Table 2.
Given the supply/demand situation just described, and wheat sold by producers to date, most of it, and remember the wheat crop marketing year is June 1 – May 31, the projected 2019-20 average weighted wheat price is projected to be $4.60/bu. It doesn’t help any that world ending stocks are expected to be up.
It is time to start thinking about pricing your 2010 wheat crop, so I have put my projection for the 2010-21 wheat crop marketing year in the third column of Table 2. I expect wheat plantings to be up marginally for the 2020 crop. I have used a million acres, as I thought spring acres would be up some and winter wheat about equal. The million may be too high as the late soybean harvest probably cut into the soft red winter wheat plantings. We will know come the January release of the winter wheat seeding report from survey data collected in December. I expect total supply to be a bit lower than 2019-20 as the 2020 trend yield is lower the 2019 yield.
Projected use is expected to be nearly the same as this year, leaving projected ending stocks down as shown in Table 2. This would put the expected average price near $5.00/bu.
SOYBEANS
The U.S. 2019 soybean average yield is projected to be 46.9 bu/ac. This is 5 bushels below the 2016 record, but only 2.3 bushels, 4.5% below the trend yield. Again, Kudos to the whole soybean supply chain given the challenging year. Michigan is expected to average 42 bu.ac, 10 below our record, but about 5 bushels below trend. These both could change, as of November 10, 15% of the U.S. crop was still not harvested and 67% of the Michigan soybean crop was still in the field.
Soybean planted acres were down 12.7 million this year, not new news, it was mostly due to prevented plantings. Harvest acres were down 12 million acres at 75.6 million. When combined with the lower yield would give us a production of 3,550 million bushels, down 878 million bushels, almost 20%. Then why such a relatively small price response given the production shortfall?
The primary reason is the huge increase in in beginning stocks. We brought into the 2019-20 marketing year 475 million more bushels than the previous year. That goes a long way in making up for the production shortfall. Additional reasons are greater rest of the world production and continued weak demand for U.S. soybeans giving the trade issues. This leaves us with projected ending stocks of 475 million bushels, 11.8% of use. This would lead to a projected average price for 2019-20 of $9.00/bu. See Table 3 column two.
How might the 2020-21 supply/demand situation play into the picture? I expect 2020 soybean planted acres to increase by 7.5 million acres, see Table 3 column three. While at first glance this is a large year to year increase, it would still be down 4 million acres from 2018. Remember the 3 million acre increase in planted corn acres, and a bit more wheat acres. Again this is due to what appears will be lower returns to soybean per acre than corn.
This projection, see Table 3, is close to a 600 million bushel increase in production, 2019 to 2020. However, after you take account the lower beginning stocks due to this year’s shorter crop, 2020-21 projected total supplies are up just 160 million bushels. Projected use is up about 120 million bushels, leaving projected ending stocks up 45 million bushels. With projected ending stocks as a percent of use at 12.5% versus this years projected 11.8%, I projected prices down a bit to $8.85.
