US corn, soybean production see slight reductions

By Aerin Einstein-Curtis

- Last updated on GMT

Slight drops in production for some feed crops including corn and soybeans raise the specter of future market volatility, says analyst.

The US Department of Agriculture (USDA) released details of expected feed grain production and trade in a new World Agricultural Supply and Demand Estimates report​ on Thursday [October 11].

Overall, the outlook projected larger supplies of wheat with falling production for corn and soybeans, based on harvested acres, said the USDA.

Futures markets had a positive reaction for corn and soybeans, said Mark Welch, Texas A&M University AgriLife Extension economist. There also were some indications that corn prices have the potential to increase later in the year.

“We knew we were going to have some carryover stocks greater than what we thought a month ago,” ​he told FeedNavigator. “So the question became for today’s report would there be any factors that would either augment that supply and put more downward pressures price on supply? Or would there be something that would trim that increase and send us the other direction on prices?”

“What we got today were a couple of features that lessened the impact of that higher carryover number,” ​he added. “It wasn’t a big production changer, just a small adjustment to the national average yield, but the yield went down instead of up again and, psychologically, that perhaps sets us on a different price path moving forward this winter.”

Soybeans and oilseeds

US oilseed production is down slightly from last month, based on the drop in soybean and sunflower seed production, the USDA said. The shift is partly offset by a bump in canola growth.

Total soybean production was lower 3.5m bushels as a slight uptick in yield was offset by a reduction in harvested area, the department said. Yield was increased by 0.3 bushels an acre and overall area harvested was reduced by 0.6m acres.

Production increases in North Dakota, Nebraska and Iowa were overshadowed by drops in several other states, the department said. Total soybean supplies for 2018/19 were a record 5.15bn bushels owing to higher beginning stocks.

Ending stocks are forecast to be 885m bushels, the department said. Season average prices for soybeans remain unchanged at $7.35-$9.85 as does the price range for soybean meal at $290-$330 a short ton.

Looking at US oilseed production, there are some questions about the recent hurricane and the availability of cottonseed or cottonseed meal, said Welch. Hurricane Michael passed through the main area responsible for Georgia’s cotton crop.

“If that puts pressure on cottonseed and cottonseed meal that sends a little more business soybean meal way – that could be one impact,” ​he added.

Globally, oilseed production was reduced based on a drop in peanut production incompletely offset by increases in soybean and rapeseed growth, the USDA said. World soybean output is forecast to be a record 369.5m tons based on increases for Canada.

Despite predicted lower oilseed production overall, ending stocks are anticipated to increase based on the growth in beginning stocks – primarily in the US, the department said. Global soybean ending stocks also were raised.

Corn predictions and market response

The 2018/19 corn crop is forecast to see a drop in production, improved exports, larger ending stocks and lower feed use, said the USDA. Corn production is expected to be 14.78bn, down 49m from earlier predictions based on a drop in expected yield.

Supplies are predicted to be record high, with the smaller crop offset by the increase in beginning stocks, the department said. The 25m bushel drop in feed and residual use is attributed to a smaller crop and disappearance indicated in 2017/18.

Corn exports were increased by 75m bushels, as the US remains price competitive and there is less competition from Russia, the department said. Predicted ending stocks for 2018/19 were increased by 39m bushels.

The current season-average corn price remains at a range of $3 to $4 a bushel, the department said.

The “backdrop”​ to the corn market this year has been the strong export demand, said Welch.

“Any factor that starts to limit the supply relative to that we can see some significant price and response to that – I think that we saw that today on the price we saw on the December contracts specifically,”​ he said. “The bump that we had there wasn’t dramatic, but it was that they leaned the other direction [and] is indicative of the sensitivity this market has. If there are any questions on the supply side relative to the strong demand that we have we could move this corn market higher.”

At this point, for feed producers there is no reason to “panic”​ or “get too excited”​ he said. “It is just an indicator that this is really tight, and as long as you have great yields and no question on the supply side we’re going to be okay. But, we start ticking away at that production number or acreage number, or there is a production problem in South America this winter and this corn thing could get volatile in a hurry.”

Watching the market and taking steps to limit the risk of market volatility might be considerations, he said. The export number reported in the WASDE was a record high for US corn exports, reflecting the global demand.

Looking forward, there might be some expectation of additional corn acres next year, said Welch, adding, there also could be questions about if farmers will be looking to store any of the grain in hopes of improved pricing.

Globally, corn production was increased slightly based on Egypt, Mali, Kenya, Canada, the EU and Serbia, which were only partly offset by Russia and Malawi, the department said.

Exports from Russia also were anticipated to drop, but be offset by increased exports from the US, Serbia and Canada, the department said. Israel and Mexico are expected to see an increase in corn imports, with corn offsetting imports of sorghum for Mexico.

Corn ending stocks were increased, based on Mexico, Egypt and Iran and partially offset by Turkey and South Africa, the department said. Global ending stocks in corn are predicted to be 159.4m tons.

Sorghum outlook

US sorghum production was increased from last month, based on a bump in per acre yield, the USDA said. The change is only partially offset by a drop in harvested area.

Texas has seen a drop in its sorghum production from dry weather in parts of the state during the growing season, said Welch. “We had a year where farmers got dinged on price and nailed on production on that portion of the crop,”​ he added of non-irrigated acres.  

“The one thing that helped is the basis has been strong for corn and grain sorghum,” ​he said. “The wheat basis has been outstanding and that carried over into corn and grain sorghum.”

Globally coarse grain production in 2018/19 is anticipated to be down about 3.8m tons, the USDA said. The forecast is for a drop in production and consumption.

Wheat forecast

The forecast for 2018/19 anticipates larger supplies, higher ending stocks and a drop in domestic use for wheat, the USDA said. Overall production was increased by 7m bushels and expected imports grew by 5m bushels based on spring wheat and durum.

However, in the first quarter there also was a 21% year-to-year growth in implied disappearance or wheat used for feed or residual uses, the department said. That is not anticipated to continue.

Export expectations for wheat remain at 1.025bn bushels, however, there were offsetting changes by class, the department said. Ending stocks were increased, but remain 13% below those set last year.

The season-average farm price range narrowed to $4.80 to $5.40, but the midpoint wasn’t altered, the department added.

There is some expectation that there could be a rebound in wheat acres, said Welch. The crop is becoming more attractive.

“These prices could show a tremendous amount of volatility,” ​he said. “We had a hint of that in wheat this year.”

Rain in parts of Texas in the past few months has been recharging the water table, and could have producers planting more wheat, he added.

Globally, wheat supplies were lowered based on drops in production for Australia and Russia, the USDA said. Australia’s production was reduced by 1.5m tons from dry conditions and frost damage, while Russia’s production was lowered by 1m tons from yields.

Ending stocks were reduced by 1.1m tons, down 5% from the record set last year, the department added.

Global trade in 2018/19 is expected to be reduced stemming from the drop in Australian exports and a reduction in imports from Bangladesh, Azerbaijan and Nigeria, the department said.

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