FOCUS ON AG

Written by Kent Thiesse

Farm Management Analyst and Vice President, MinnStar Bank
July 15, 2019

GRAIN PRICES NOT AFFECTED BY JULY WASDE REPORT

The USDA Grains Supply and Demand (WASDE) Report released on July 11 did not seem to have any
impact on corn and soybean prices, even though some of the data was somewhat “bearish” toward the
grain markets. In fact, prices for both corn and soybeans increased immediately following the WASDE
report. The report increased the 2019 U.S. planted corn acreage and lowered the national soybean
acreage from the June estimates, which matched the crop acreage numbers in the June 28 USDA crop
acreage report. However, many private crop analysts are questioning the USDA acreage numbers and
feel there could be further adjustments in the coming months.

Based on the July 11 report, USDA is projecting that 2019-20 corn ending stocks will be 2.01 billion
bushels by August 31, 2020, which is an increase of 335 million bushels in the carryover level from the
mid-June WASDE report, and compares to ending stocks of 2.34 billion bushels for 2018-19. The
2019-20 carryover level is based on 83.6 million harvested corn acres in the U.S. for 2019 and an
average U.S. corn yield of 166.0 bushels per acre, resulting in an estimated 2019 total corn production
of 13.875 billion bushels. This compares to total U.S. corn production of just over 14.25 billion bushels
in 2018 and 14.4 billion bushels in 2017. The total corn usage for 2019-20 is estimated at just over
14.25 billion bushels, which would be at the same level as estimated total corn usage for 2018-19.

USDA is now projecting 2019-20 market year average (MYA) corn price at $3.80 per bushel, which is
at the same level at the June WASDE report. The marketing year for the 2019 crop year will run from
September 1, 2019 through August 31, 2020. The final 2018-19 national MYA price is now estimated
at $3.60 per bushel, which follows annual corn MYA prices of $3.36 per bushel in both 2017-18 and
2016-17 and $3.61 per bushel in 2015-16.

Based on the July 11th WASDE report, USDA is now estimating 2019 U.S. planted soybean acreage at
80 million acres, which is a decline of 4.6 million acres from the June report, and is far below the
record national soybean acreage of 89.2 million acres in 2018. The July 11 th report projected 79.3
harvested acres of soybeans in 2019, with a U.S. average soybean yield of 48.5 bushels per acre, which
was reduced by one bushel per acre from the June WASDE report. The total U.S soybean production
for 2019 is now estimated at just over 3.84 billion bushels, which would be down considerably from
the record U.S. soybean production of 4.54 billion bushels in 2018.

USDA is projecting total soybean usage for 2019-20 at 4.12 billion bushels, which is an increase from
3.95 billion bushels for 2018-19. The increased usage for the marketing year is the result of higher
levels expected for both the domestic soybean crush and soybean exports in 2019-20. USDA is now
estimating soybean ending stocks at the end of the 2019-20 marketing year to be at 795 million
bushels, which is still high, but would represent a 24 percent decline from the 1.05 billion bushels of
carryover estimated for 2018-2019.

USDA is estimating the national MYA soybean price for the 2019-20 marketing year at $8.40 per
bushel. This compares to an estimated soybean MYA price of $8.50 per bushel for the 2018-19
marketing year, which ends on August 31, 2019. The final MYA soybean price for 2019-20 trails the
final MYA price in other recent years $9.33 per bushel for 2017-18, $9.47 per bushel in 2016-17 and
$8.95 per bushel in 2015-16.
There are still a lot of questions yet to be answered regarding both the supply and demand figures in
the July 11th WASDE report. Based on the immediate corn and soybean market reaction following
recent WASDE report, it is fairly obvious that weather conditions and crop production potential are
currently dominating the marketing decisions of grain traders. Many private analysts feel that total
2019 U.S. corn acreage may be over-estimated by USDA, and that the number of prevented planted
acres may be under-estimated. Some analysts are also questioning the current U.S. average yield
estimates of 166 bushels per acre for corn and 48.5 bushels per acre for soybeans. We should get a bit
clearer indication of both the acreage numbers and the 2019 U.S. crop yields in the coming months, as
we get closer to Fall harvest.

Both “old crop” and “new-crop” corn and soybean prices have been in a fairly “bullish” trend in the
past few weeks, primarily due to the late planting in many areas of the Corn Belt and concerns over
2019 production levels. Chicago Board of Trade (CBOT) prices for December corn futures closed at
$4.48 per bushel on July 11, which is an increase of $.76 per bushel from $3.72 per bushel following
the May 10th WASDE report. A year ago, CBOT December corn futures for 2018 were trading near
$3.59 per bushel following the July 12th WASDE report. By comparison, CBOT December corn futures
were at $3.98 per bushel on July 12, 2017, and $3.58 per bushel on July 12, 2016.

Soybean futures prices on the CBOT have also increased since the May 10 th WASDE report. The
closing November soybean futures price following the July 11 th WASDE report was $9.17 per bushel,
which was an increase of $.84 per bushel from the futures price on May 10. The CBOT price for
November soybean futures compares to “new crop” soybean futures prices of $8.49 per bushel on July
12, 2018, $10.34 per bushel on July 12, 2017 and $10.57 per bushel on July 12, 2016.

Local forward cash prices for “new crop” 2019 corn have risen to over $4.00 per bushel at most
locations in the Upper Midwest, which will help offset the reduced corn yields for many producers. By
July 12, the local current cash corn price for remaining 2018 corn in on-farm storage was also above
$4.00 per bushel at most locations in in the Northern Corn Belt, with tighter local basis levels than
existed earlier this year. This has also provided a welcome opportunity for farmers that are still selling
unpriced 2018 corn, which is being delivered before the 2019 harvest season.

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Note --- For additional information contact Kent Thiesse, Farm Management Analyst and Senior
Vice President, MinnStar Bank, Lake Crystal, MN. (Phone --- (507) 381-7960);
E-mail --- kent.thiesse@minnstarbank.com) Web Site --- http://www.minnstarbank.com/