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Grain markets rise following USDA reports

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The combination of lower production, increased usage, and tighter carryover levels has resulted in the sharply higher grain market prices in recent weeks.

The monthly USDA World Supply and Demand Estimates (WASDE) Report was released on November 10, which will likely impact corn and soybean markets in the coming months. The WASDE Report projected significantly lower 2020-21 U.S. corn and soybean carryover estimates at the end of the current marketing year on August 31, 2021, as compared to estimates earlier this year. Total usage levels for both corn and soybeans in 2020-21 are expected to increase above demand levels for the 2019-20 marketing year, while 2020 production levels were decreased from a month earlier.

The combination of lower production, increased usage and tighter carryover levels has resulted in the sharply higher grain market prices in recent weeks. December corn futures closed at $4.23 per bushel on the Chicago Board of Trade (CBOT) following the November 10 WASDE report, which compares to $3.14 per bushel just three months earlier following the WASDE report on August 12. Similarly, CBOT November soybean futures closed at $11.38 per bushel on November 10, compared to $8.83 per bushel following the August 12 WASDE report.

The estimated 2020 national average corn yield is now estimated at 175.8 bushels per acre, which was lowered from 178.4 in October. The 2020 harvested corn acreage in the U.S. was maintained 82.5 million acres, resulting in a total estimated 2020 corn production of just over 14.5 billion bushels. This was a decline of 215 million bushels from the October estimate and compares to total U.S. corn production of just over 13.6 billion bushels in 2019. Total corn usage for the 2020-21 year is now estimated at just over 14.8 billion bushels, which would be a 6.7 percent increase in total corn demand levels compared to the 2019-20 marketing year. Corn export levels are expected to increase by 49 percent or 872 million bushels in the coming year, primarily due to added corn sales to China. Corn used for ethanol production was also projected to increase slightly.

USDA is now estimating 2020-2021 U.S. corn ending stocks at 1.7 billion bushels, which compares to carryout levels of 1.99 billion bushels for 2019-20, 2.11 billion bushels in 2018-19, and 2.14 billion bushels in 2017-18. Things have changed considerably since USDA projected the 2020-21 carryout level at 2.65 billion bushels on July 1. Based on current estimates, the U.S. corn carryout to use ratio would be at 11.5 percent for 2020-21, which compares to14.4 percent in 2019-20, 14.6 percent for 2018-19, and 14.5 percent in 2017-18. This could result in some potential for short-term rallies in the cash corn market in the coming months, especially if USDA makes further increases in 2020-21 corn usage levels.

The 2020-21 U.S. soybean ending stocks in the recent WASDE Report were estimated at 190 million bushels, which was well below the average estimates of grain marketing analysts. The projected soybean ending stocks are down significantly from the ending stocks of 523 million bushels in 2019-20 and 913 million bushels in 2018-19. The expected soybean ending stocks for the coming year would be at the lowest since the 2015-16 level of 197 million bushels. The soybean carryout-to-use ratio for 2020-21 is estimated at the very tight level of 4.2 percent, which is down considerably from 11.5 percent in 2019-20 and 23 percent for 2018-19.

Total U.S. soybean production for 2020 is estimated at 4.17 billion bushels on November 1, which was reduced by 98 million bushels from the October USDA estimate. Total soybean demand for 2020-21 is projected to increase by 14.2 percent from a year earlier, with soybean usage now estimated at just over 4.5 billion bushels for the coming year. The increase in U.S. soybean demand is primarily due to a significant increase of 31 percent or 524 million bushels in the expected soybean export levels in 2020-21. This is largely due to the likelihood of enhanced soybean sales to China. The expected large decrease in soybean ending stocks may offer some opportunities for increases in farm-level soybean prices in the coming months, especially if there are any weather-related production issues in South America.

Based on the November WASDE report, USDA is currently estimating the U.S average on-farm cash corn price for the 2020-2021 marketing year at $4.00 per bushel, which was an increase of $.40 per bushel from the October estimate. This type of increase in the projected corn price for the coming year by USDA during harvest season is very unusual. The 2020-21 USDA price estimates are the expected average farm-level prices for the 2020 crop from September 1, 2020 to August 31, 2021; however, they do not represent estimated prices for either the 2020 or 2021 calendar year. The projected USDA average corn price of $4.00 per bushel would be the highest since 2013-14 when the final national average corn price was $4.46 per bushel. The 2020-21 estimated corn price compares to recent national average corn prices of $3.56 per bushel for 2019-20, $3.61 per bushel for 2018-19, and $3.36 per bushel for both 2017-18 and 2016-17.

USDA increased the projected U.S. average farm-level soybean price for the 2020-2021 marketing year to $10.40 per bushel, which was raised by $.60 per bushel from the October estimate. Similar to corn, this type of price increase by USDA is very unusual during the Fall months. The last time that the national average soybean price exceed $10.00 per bushel was in 2014-15 at $10.10 per bushel. The 2020-21 soybean price estimate of $10.40 per bushel compares to $8.57 per bushel for 2019-20, $8.48 per bushel for 2018-19, $9.35 per bushel for 2017-18, and $9.47 per bushel in 2016-17.

National yield projections lowered

Based on the USDA Crop Production Report released on November 10, USDA lowered the projected U.S. average corn yield for 2020 well beyond the expectations of grain marketing analysts. USDA decreased the expected 2020 average corn yield by 2.6 bushels per acre compared to the October estimate and is now estimating the national average corn yield at 175.8 bushels per acre. This compares to previous U.S. corn yields of 167.5 bushels per acre in 2019, 176.4 bushels per acre in 2018, the record yield of 176.6 bushels per acre in 2017, and 174.6 bushels per acre in 2016. The projected 2020 U.S. harvested corn acreage is 82.5 million acres, which is up from 81.3 million acres that were harvested last year.

In the November report, the projected 2020 corn yields were lowered or kept the same compared to the October yield estimates in every state except Oklahoma. The 2020 Minnesota estimate was kept the same as the October estimate and is projected at the record level of 202 bushels per acre, which would be the highest among the major corn producing states. The previous Minnesota record corn yield was 194 bushels per acre in 2017. Other estimates for 2020 State average corn yields are Iowa at 184 bushels per acre, Illinois at 195 bushels per acre, Indiana at 189 bushels per acre, Nebraska at 185 bushels per acre, South Dakota at 165 bushels per acre, North Dakota at 145 bushels per acre and Wisconsin at 184 bushels per acre.

USDA is estimating the 2020 U.S. soybean yield at 50.7 bushels per acre, which was a decline of 1.2 bushels from the October estimate of 51.9 bushels per acre. The projected 2020 national average soybean yield compares to 47.4 bushels per acre in 2019, 50.6 bushels per acre in 2018, the record U.S. soybean yield of 52.0 bushels per acre in 2016, and 49.3 bushels per acre in 2017. The 2020 harvested soybean acreage is projected at 82.3 million acres, which is an increase of nearly 10 percent from the 74.9 million acres harvested in 2019. 

USDA is estimating the 2020 Minnesota soybean yield at 51 bushels per acre, which is up considerably from 44 bushels per acre in 2019. The 2020 Minnesota soybean yield still trails the record yield of 52 bushels per acre in 2016 and is below many other major soybean producing states. Other projected State soybean yields for 2020 are Iowa at 54 bushels per acre, Illinois, Indians and Nebraska at 58 bushels per acre, South Dakota at 47 bushels per acre, North Dakota at 33 bushels per acre, and Wisconsin at 53 bushels per acre.

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