Farm Progress

Unsurprisingly, trade war implications impacted soybean ending stocks and prices in the latest WASDE report.

Kent Thiesse, Farm management analyst and vice president

July 17, 2018

5 Min Read
You can see the soybeans growing in these pods as the morning sun illuminates this soybean field on a late August day near Goldfield, Iowa.ThinkStock

The USDA World Agricultural Supply and Demand Estimates (WASDE) Report released on July 12 provided more negative numbers for future soybean prices. The report showed an increase of 25 percent in the projected ending stocks for soybeans by Sept. 1, 2019.

Some good news in the report for grain prices, was a slight decline in the estimated 2018-19 ending stocks for corn. The latest report also kept the expectations for the 2018 average U.S. corn and soybean yields at the same levels as previous estimates. Corn and soybean market prices have remained relatively steady following the release of the report, after posting some rather significant declines in the weeks prior to the report.

Soybean stocks and prices

USDA is now estimating soybean ending stocks at the end of the 2018-19 marketing year to be at 580 million bushels, which is a large increase from the June WASDE estimate of 385 million bushels. The 2018-19 projected carryover estimate compares to 465 million bushels for a final estimate in 2017-18, and 302 million bushels in 2016-17. The projected soybean export numbers were closely watched, due to the increasing trade war between the U.S. and China. The estimated 2018-19 soybean exports were reduced by 250 million bushels from the June report to the July report.

Based on the June 30th USDA Acreage Report, U.S. soybean acreage for 2018 will reach 89.6 million acres, with 88.9 million acres being harvested, which is an increase of 700,000 acres from the June report. In the July 12th WASDE report, USDA is projecting a U.S. soybean yield of 48.5 bushels per acre in 2018, resulting in a total 2018 estimated U.S. soybean production of 4.31 billion bushels. If achieved, the 2018 production level would be just shy of the record U.S soybean production of 4.39 billion bushels in 2017. Given the excellent crop growing conditions in the Eastern Corn Belt, some analysts feel that the national soybean yield level may increase in future months.

USDA is estimating the national MYA soybean price for the 2018-19 marketing year in a wide range from $8 to $10.50 per bushel, or an average of $9.25 per bushel, which was lowered 75¢ per bushel from the June estimate. This compares to an estimated final soybean MYA price of $9.35 for the 2017-18 marketing year, $9.47 per bushel for 2016-17, and $8.95 per bushel for 2015-16. Many analysts feel that the 2018-19 estimate could decline further in coming months, with the ongoing trade wars with China and other countries, together with the potential for further increases in estimated soybean ending stocks for 2018-19, if the national soybean yield increases.

Corn stocks and prices

Based on the July 12 WASDE report, USDA is projecting 2018-19 corn ending stocks to be 1.55 billion bushels by September 1, 2019, which was a slight decrease compared to June corn carryover level. The carryover level is based on 81.8 million harvested corn acres in the U.S. for 2018, and a U.S. corn yield of 174 bushels per acre, resulting in an estimated 2018 total corn production levels of just over 14.2 billion bushels. This compares to recent total U.S. corn production of 14.6 billion bushels in 2017, 15.1 billion bushels in 2016, and 13.6 billion in 2015. Corn export estimates in the July report were increased slightly from the June WASDE report.   

USDA is now projecting the 2018-19 market year average (MYA) corn price in a range of $3.30 to $4.30 per bushel, or an average of $3.80 per bushel. The marketing year for the 2018-19 crop year will run from September 1, 2018 through August 31, 2019. The final national MYA price for 2017-18 is now estimated at $3.40 per bushel, which compares to the final MYA prices of $3.36 per bushel for 2016-17 and $3.61 per bushel for 2015-16.

Bearish reactions

Both old-crop and new-crop corn and soybean prices had reacted in a very bearish fashion prior to the July 12 WASDE report, due to estimated increases in both corn and soybean crop acreage for 2018 in the USDA Acreage Report.  Of course, the overriding factor in the recent decline in the grain markets has been the escalating trade wars with China, Mexico, Canada, and other countries. Based on the latest WASDE report, approximately 47 percent of the soybeans and 16 percent of the corn raised in the U.S. in 2017 will be exported by Sept. 1, 2018. In addition, corn and soybean meal used for livestock feed is another big key to grain usage in a given year. Products from livestock production also rely heavily on export markets, which have been under severe pressure in recent months.

November soybean futures prices on the Chicago Board of Trade (CBOT) have dropped quite dramatically in the past two months. The closing price of 2018 November soybean futures on May 10, following the release of the WASDE monthly report, was $10.31 per bushel, which declined to $8.34 per bushel following the July 12 report. The CBOT November soybean futures price of $8.34 per bushel on July 12, compares to CBOT November soybean prices of $10.34 per bushel on July 12, 2017 and $10.57 per bushel on July 15, 2016. Local cash soybean prices for fall delivery in southern Minnesota have declined by similar amounts in the past two months, with many locations now offering price quotes near $7.50 per bushel, which is at the lowest level in many years.

The declines in the CBOT December corn futures prices for 2018 have also been significant in the past two months. December corn futures closed at $3.59 per bushel on July 12, following the release of the WASDE report, which represented a decline of 14 percent from the $4.19 per bushel closing price following the May 10 report. By comparison, CBOT December corn futures were at $3.98 per bushel a year ago on July 12, 2017, and at $3.58 per bushel on July 15, 2016. Local cash corn prices for Fall delivery in Southern Minnesota have been near $3.00 per bushel in recent weeks, which is well-below the 2018 cost of production for most producers.

About the Author(s)

Kent Thiesse

Farm management analyst and vice president, MinnStar Bank

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