On the eve of USDA’s final production estimates for 2020 grain production, a new January 2021 Farm Futures survey indicates soybean stocks will shrink to historic levels.

The annual January survey was conducted December 4 – 18, 2020 and recorded 806 farmer responses through email questionnaires.

The Farm Futures survey projects 2020 soybean yields at 49.9 bpa – a 1.6% decrease from current USDA yields of 50.7 bpa and the third highest U.S. soybean yield on record. Given current acreage estimates, the 2020 U.S. soybean crop will shrink by 66.6 million bushels to 4.104 billion bushels – the fourth largest soy crop in history.

Significant market implications

A reduced 2020 soybean crop forecast has pretty stark market implications. If the Farm Futures forecast is realized it would leave 2020/21 ending soybean stocks at 108 million bushels. The stocks-to-use ratio would shrink from 3.9% to 2.4% - edging out 2013/14’s ratio of 2.6% to be the tightest U.S. soy inventory level in history. Prices would likely react accordingly.

Even so, livestock feeders and crush facilities will continue to battle exporters for usable supplies. Demand rationing will likely be necessary to sustain domestic usage rates – namely for livestock producers and exporters.

But strong consumer demand for meat, few cheap alternatives to protein feed sources, and a weak dollar offer sellers little incentive to slow soybean flows in the short run. Expect the market to continue rallying until Brazil’s soybean crop hits export channels in the coming weeks.

Looking to 2021 soybean production, the new crop soybean-corn price ratio has shown a clear and strong preference for increasing soybean acreage this spring. A tighter 2020/21 soybean carryout – shrinking from 14 days to 9 – would reward soybean growers looking to make premiums selling beans off the combine next fall.

Corn yields tumble

The January 2021 Farm Futures survey found U.S. farmers estimate the national corn yield at 175.2 bushels per acre (bpa). This figure is slightly below USDA’s current estimate of 175.8 bpa and, if realized, would shrink the 2020 corn crop by 50 million bushels to 14.547 billion bushels – the third highest crop and yield in history.

Holding usage rates constant at the December 2020 USDA projection of 14.825 billion bushels, 2020/21 ending corn supplies will likely shrink to 1.652 billion bushels. This would result in a stocks-to-use ratio of 11.1% - 0.3% below current estimates.

Old crop days of carryout will fall by a day to 41 days under the new Farm Futures estimate. While the smaller crop will invariably tighten domestic corn supplies, ending stocks at 1.652 billion bushels will still be plentiful enough to sustain current demand levels.

However, corn exports have been strong so far in the 2020/21 marketing year with little signs of slowing down amid a rising dollar and strong Chinese demand. And an ethanol recovery from the pandemic collapse would certainly increase usage rates.

If USDA increases its optimism on either of those demand targets, then 1.652 billion bushels in 2020/21 corn ending stocks may turn out to be much smaller than previously thought.

Wheat yields fall

Farm Futures’ January 2021 survey estimates 2020 U.S. wheat yields at 48.3 bpa, down 2.8% from the current USDA projection of 49.7 bpa. While the updated yield would be the third largest on record, the total crop will shrink by 50.3 million bushels according to Farm Futures’ calculations to 1.776 million bushels – the 45^th largest U.S. wheat crop in history.

Provided USDA holds 2020/21 wheat usage estimates constant next week, expect ending stocks to shrink to 812 million bushels for the 2020/21 marketing year. That amount still signals a large ending stockpile of wheat by June 2021.

But amid rising global and domestic feed usage rates, international food hoarding, and limited exportable supplies in the Black Sea region, U.S. wheat stocks will slip to their tightest level since 2014/15.

2020 was a challenging year

Following a miserable 2019 planting season, farmers last spring were eager for a crop year with less weather constraints during planting and harvest and a return to trendline yields.

But while 2020 provided good planting conditions for most farmers in the Heartland, growers in the Dakotas battled another year of cool and wet weather as they tried to harvest 2019’s corn crop by end of March. The subsequent corn planting delays in North and South Dakota led to 6.2 million acres of prevent plant corn – the second highest on record after 2019.

Heavy spring rains led to a smattering of corn and soybean replanting in the central Mississippi River Valley. Meanwhile, hard red winter wheat growers in the Southern Plains ached for the excess moisture as a dry winter and spring frost eroded yield potential.

A July hailstorm damaged crops in the Northern Plains in July, but the real damage would settle in during August as derecho winds flattened corn and soybeans from Iowa to Northern Indiana during peak pollination season and kicked off a late-season drought that plagued yields across the country.

A September frost in the Northern Plains was the final nail in the coffin for 2020 yield potential. To be sure, some areas fared better than others during the 2020 growing season. But the results were a far cry from the optimism farmers harbored for 2020 early in the year before the pandemic exacted a colossal and excruciating toll on demand.

While the 2020 crop shortfall sent futures and cash prices rallying to provide some solace to farmers, weather-weary producers will continue to look to 2021 for a chance of more stable growing conditions and plentiful yields.