Washington Report

The following tables compare the March 2020 WASDE corn and soybeans data and estimates of the potential 2020-21 outlook based on the acreage numbers in the March 1 planting intentions report released by USDA this week.

This analysis is provided by Dave Juday, the founder and principal of The Juday Group, based on available data from the U.S. Department of Agriculture (USDA).

The report showed a big jump in corn, up to 97 million acres, however, USDA collected its planting intentions survey results in early March when the new crop soybean/corn price ratio favored corn.  Since then the ratio has turned more in favor of soybeans, and the conventional trade wisdom now is that at least 1 million intended corn acres will be swapped to soybeans.

The bearish corn planting intentions were partially offset by lower than expected 1 March quarterly corn stocks of 7.95 billion bushels, about 200 million less than the collective industry guesstimate.

Another big development to be factored in the collapse in the crude oil market due to the Russia/Saudi price war which is oversupplying the market, and the travel and work restrictions in the U.S. (and elsewhere) which have driven gasoline demand through the floor.  Some in the oil industry in Texas are asking for production controls by their regulator (the Railroad Commission, oddly enough), and President Trump says he thinks he can get the Russians and Saudis to scale back their race to the price floor, but for context, even that news on Thursday sparked a record daily gain in crude oil futures in percentage terms, and pushed oil up to $24/bbl.  That is still post 9/11 price levels.  And not many people are going to be commuting to work for the next 15, 30, 45 days.  With 10 million unemployment claims in just the past 2 weeks, we can also assume there will be summer vacation driving trips cancelled as well.

As a result, ethanol demand has also collapsed, which is bearish for corn.  But also, production of DDGS has been – and is – falling with ethanol plant closures.  That has a big impact for feeding for beef cattle, dairy and to a lesser extent for hogs. DDGS are trading at as much as 180 percent of corn.

Assuming ethanol production drops 850 million to 1 billion gallons, DDGS production will drop between 2.5 to 3 million tons.  Some of that loss of production and reduced supply in the domestic market will be offset by reduced exports, but there will be a gap to be filled with soybean meal – as well as more corn.  The crude oil market situation has turned the clock back 15 years on feed formulation.

Following are some are very preliminary outlook estimates, based on lots of assumptions given the current uncertainty.  Nonetheless, the bottom line is a bearish outlook for corn and a bullish outlook for soybean meal.

Corn

• Corn marketing year runs from 1 Sep 1 through 31 Aug
• Yield at 171 bushels per acre (assumption)
• Imports down to 25 million bushels
• Carry In reduced on lower quarterly stocks
• Feed/Residual use is increased because animals on feed numbers are at or near record levels and DDG availability will be reduced because of the slowdown in ethanol production.
• Ethanol used for corn reduced by 300 million bushels (rounded up 296.5 mln bushels calculated above).
• Corn export increased by 200 million bushels based on China buying corn.

Ending stocks could jump from 1.9 billion bushels to 2.8 billion bushels if intended corn acres switch to soybeans, more the 3 billion bushels if not. That is bearish. The 2020 corn yield will be the critical piece of this puzzle; it would have to drop below 160 bushels per acre to turn bullish.

Soybeans

The March planting intentions have soybean acres at 83.5 million; as mentioned above, the table below assumes and increase of 1 million acres switching from corn to soybeans.

• The soybean marketing year runs from 1 Sept through 31 Aug
• Yield is 50 bushels per acre (assumption).
• Crush is increased because of the strong demand plus the reduced availability of DDG’s.
• Exports are increased based on China buying

The result is U.S. soybean ending supplies will drop from a projected 425 million bushels this marketing year to 294 million next year, a very bullish outlook. Again, like corn, yield is important because there is not much room for slippage with potentially bottom-of-the-bin low carryover.