The U.S. Department of Agriculture shocked trade by cutting the national corn yield estimate by a full 10 bushels per acre in the June supply and demand report. This puts the average national yield at 166 bushels per acre. A reduction of 3 million was made to planted acres as well. This combination will take 1.4 billion bushels off the U.S. corn crop, putting it at 13.68 billion bushels. The USDA is also reducing corn demand, though, mainly exports by a large 425 million bushels. Old crop corn carryout was increased by 100 million bushels to a 2.195 billion bushel total. Even with reductions to usage, new crop ending stocks were reduced by 800 million bushels to a 1.675 billion bushel projection.
No changes were made to soybean production estimates, with yield holding at 49.5 bushels per acre and a crop at 4.15 billion bushels. The USDA lowered old crop soybean exports by 75 million bushels due to recent trade issues, though, which was enough to raise old crop ending stocks to 1.07 billion bushels. The USDA also increased its new crop soybean carryout estimate to 1.045 billion bushels.
The global numbers also had changes, mainly on new crop. World ending stocks at the end of the 2019-20 marketing year are now estimated at 290.5 million metric tons on corn, 112.7 million metric tons for soybeans, and 294.3 million metric tons for wheat. The greatest change was to corn with a 25 million metric ton reduction, mainly due to the smaller U.S. crop.
The initial corn crop rating was released at 59 percent good/excellent. This is well behind the initial rating of 79 percent G/E last year and the average of 73 percent G/E. Another 32 percent of the crop is rated as fair. This leaves just 9 percent of the crop as poorly rated, which is a surprise given recent weather conditions.
Long-range weather models continue to be monitored, with a shift to temperatures becoming a focal point. Some models indicate the U.S. is set to have one of the 25 coolest Junes since 1895. There is little doubt this will impact crop development, and only amplify issues already started with our late planting.
We are starting to see a different opinion when it comes to U.S. soybean production this year. While many forecasters are predicting a lower yield per acre, there are many who believe acres will be up. It is quite possible that we could see a larger soybean crop than is currently being used in balance sheets even with reduced yield.
More questions are starting to arise on the impact of the late planting on harvest this year. One thing that is a given is that harvest will be delayed for much of the Corn Belt. The initial reaction to this is a reduction to yields, but there are other ramifications, mainly crop quality.
One of the greatest concerns with a late developing crop is an early end to the growing season, mainly from an early freeze. Historically, an early freeze is associated with lighter test weight in corn. It can also impact the oil content in soybeans, and in some cases, cause green oil if the crop is very immature.
Later developing crops can also call for more handling, primarily drying. Even if this does not impact quality it adds to the cost of production and lowers net revenue.
Before long we will start to see a defined shift in market attitude. This will be from old crop interest to new crop. While old crop balance sheets are still very much a market factor, they start to become more known at this time of the marketing year. This is also when we can see more interest placed on commodity demand.
An announcement has been made regarding the Market Facilitation Program and potential payments. This is the support program that is designed to help offset farmer losses due to recent trade issues between the U.S. and our buyers, mainly China. According to the USDA, unplanted acres are not legally eligible for MFP payments. This is a major concern for areas that are unable to get into fields from spring flooding. The USDA is working on making payments available for farmers who plant cover crops. The USDA stated that more details will be released in upcoming weeks.
This commentary is the sole opinion of Karl Setzer, market adviser for AgriVisor. This is intended for informational purposes only and not to be used for specific trading recommendations. The information used to generate this commentary is gathered from a variety of sources believed to be accurate. If you have any questions or would like additional market information, feel free to contact Karl at firstname.lastname@example.org. You can also follow Karl on Twitter via @ksetzergrains.