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Corn, soybean prices drop after July WASDE report

The USDA World Agricultural Supply and Demand Estimates (WASDE) Report released July 11 provided more negative numbers for future corn and soybean prices. The report showed significant increases in the projected ending stocks for both corn and soybeans by Sept. 1, 2015. The report also verified the expectations for very good to excellent 2014 national corn and soybean yields in the U.S. Corn and soybean market prices have dropped dramatically in the past few weeks, which will likely have a significant financial impact on farm operators in the Upper Midwest.

Based on the July 11 report, USDA is projecting that 2014-15 corn ending stocks will rise to near 1.8 billion bushels by Sept. 1, 2015, which would be the largest corn carryover level in many years. The carryover level is based on 83.3 million harvested corn acres in the U.S. for 2014, and a record U.S. corn yield of 165.3 bushels per acre. Some marketing analysts feel that the USDA estimate for the 2014 national corn yield may be too conservative, given the excellent condition of the corn crop in most areas of the U.S., other than in portions of Minnesota and other northern Corn Belt states. USDA is now projecting 2014-15 yearly average corn prices in a range of $3.65-4.35 per bushel, or an average of $4 per bushel, which again could be too high if national yields increase.

Earlier, the June 30 USDA Quarterly Grain Stocks Report listed total corn stocks available on June 1 at 3.85 billion bushels, which is a 39% increase over the 2.76 billion bushels in June 2013. Approximately 1.86 billion bushels of the total stocks were stored on farms, as of June 1, which is up about 48% from a year earlier. The 2013-14 corn ending stocks are projected to be near 1.25 billion bushels, which compares to 821 million bushels at the end of the 2012-13 marketing year. USDA is estimating U.S. average corn price for the 2013-14 marketing year to be near $4.45 per bushel, which compares to $6.89 per bushel for 2012-13.     

Based on the June 30 USDA Acreage Report, U.S. soybean acreage for 2014 will reach a record level of 84.8 million acres, with 84.1 million acres being harvested. In the July 11 supply and demand report, USDA is projecting a record U.S. soybean yield of 45.2 bushels per acre in 2014, which if achieved, would lead to total U.S soybean production of 3.8 billion bushels in 2014. By comparison, total U.S. soybean production was less than 3.3 billion bushels in 2013. USDA is now estimating soybean ending stocks at the end of the 2014-15 marketing year to be at 415 million bushels, which would be among the highest levels ever. 2013-14 soybean ending stocks are estimated to be at 140 million bushels, which would very similar the level of carryover soybeans from 2012-13. USDA is estimating the average U.S. soybean price from Sept. 1, 2014 through Aug. 31, 2015 in a range of $9.50-11.50 per bushel, or an average of $10.50 per bushel.

The U.S. soybean stocks in the June 30 report were estimated at nearly 405 million bushels, which is about 7 percent lower than the soybean stocks of 435 million bushels on June 1, 2013. The soybean stocks on June 1 were at the lowest level in recent years, which helped maintain strong market prices for remaining 2013 soybeans until late June. The anticipated record U.S. soybean acreage and yield for 2014 has now taken over, and caused a significant reduction in the old-crop soybean price. USDA is now estimating the 2013-14 yearly average soybean price to end near $13 per bushel, which compares to $14.40 per bushel in 2012-13.

Both old-crop and new-crop corn and soybean prices have reacted in a very bearish fashion to the crop acreage trends and the identified levels of grain stocks listed in the June 30 USDA Reports, which was further substantiated by the July 11 supply and demand report. Chicago Board of Trade (CBOT) prices for December corn futures closed at $3.84 per bushel on July 11, which is a drop of $1.14 per bushel from $4.98 per bushel on May 9. December 2014 corn futures are at the lowest level thus far since they were posted by CBOT, and have dropped by nearly 25% since late April of this year. CBOT nearby cash futures prices dropped from $5.05 per bushel on May 9 to $3.99 per bushel on July 11.

Local cash prices for new-crop 2014 corn have dropped to near $3.30 per bushel or lower at many locations in the Upper Midwest, which is well below the breakeven level for most corn producers. The local cash corn price on July 11 for unsold 2013 corn had dropped below $3.50 per bushel at most locations in Minnesota, which compares to near $4.70 per bushel in early May. USDA estimated that Minnesota farmers still had approximately 245 million bushels of corn in on-farm storage as of June 1, while Iowa farmers had 285 million bushels still stored on the farm. USDA does not track the percentage of bushels in storage that have been sold; however, most analysts feel that a large percentage of the 2013 corn bushels still in farm storage are probably not priced, which could result in a large loss of financial opportunity to those farm operators.  

Soybean futures prices on the CBOT have also dropped quite dramatically since the June 30 Acreage Report, which showed record U.S. soybean acreage for 2014, along with the potential for record U.S. soybean yields this year. CBOT soybean futures for new-crop 2014 soybeans closed at $10.75 per bushel on July 11, following the report. This compares to $12.33 per bushel on June 23, prior to the USDA Acreage Report, and represents a drop of $1.58 per bushel in less than three weeks.

The 2014 harvest forward contract cash soybean price had dropped to just above $10 per bushel by July 11 at many local grain elevators in Minnesota, which compares to near $11.75 per bushel as recently as June 23. The current cash soybean price would also be below the 2014 cost of production for many soybean producers. The cash price for remaining 2013 soybeans in storage dropped from near $14 per bushel on June 23 to below $12.50 per bushel on July 11; however, there is a much lower level of unsold soybean bushels still on farms, as compared to corn.

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