October USDA Report Weighs In with Big Crops

I am getting closer to harvesting soybeans. With another 2 inches of rain last weekend it has been quite a challenge to find dry ground and dry soybeans. It so happens that I farm some lighter sandier ground as well as my heavy clay ground. With the clay taking much longer to dry out, it gives me the option to harvest on the later ground first. I’m hoping to have a better harvest report next week.

My beans might be wet, but I can walk in the crop and it is a good one, better than 2017 for me. After today’s USDA October report, maybe many of us can think the same. The USDA announced today US farmers are expected to harvest 53.1 bushels per acre of soybeans, which is up from last month’s forecast of 52.8 bushels per acre. This will put the overall production at 4.69 billion bushels. With this increase production 2018/19 soybean ending stocks were pegged at 885 million bushels. Wow, that is a huge number, hard for somebody like me to get used to. This was not the year for losing all of that Chinese demand.

On the corn side of the ledger the USDA actually reduced US national corn yield to 180.7 bushels per acre, which is down slightly from last month’s prediction of 181.3 bushels per acre. This will put the US national corn yield of 14.83 billion bushels, which would be the second-highest level production ever recorded based on a record bushels per acre yield prediction. Corn ending stocks for 2018/2019 are predicted to come in at 1.813 billion bushels.

I know what some of you must think; we’ve seen this before. A couple months ago I said that we as farmers have come to expect our annual productivity gains as almost a fait accompli. In other words, higher yields on a consistent basis are almost being taken for granted. For instance, a cornfield very close to me was taken off recently and the farmer said that he got between 210-215 bushels per acre. He then remarked that this was a very good yield that he was almost expecting, even though 200 bushel yields on corn wasn’t part of the discussion 10 years ago in this part of country. Clearly, we’ve had a good six-year run of yields since the 2012 drought and farmers have dialed in their productivity gains. The USDA report released today was another indication of that.

If only we could have the same demand gains on a consistent basis, we might be able to get those prices a little higher. Needless to say, the USDA actually maintained their export forecast for soybeans at 2.06 billion bushels, the same as their September report. Many of us are skeptical with this, as the Chinese seem determined not buy very many Americans soybeans. On the corn side of the ledger USDA actually increased corn export predictions by 75 million bushels. Despite ruminations to the contrary, grain demand still remains strong.

This demand might be strong but every American or Canadian farmer would love to see it stronger. Interestingly enough, today a story surfaced that US President Trump and Chinese President Xi Jinping plan to meet at the end of November in Argentina during the G20 meeting. Of course, I won’t be at the meeting and depending on what you read the Chinese are enthusiastic about the meeting and some are not so much. However, wouldn’t it be nice in a show of faith if the Chinese dropped the 25% tariff on American soybeans? It would be a goodwill gesture maybe to help bring some sanity back to our agricultural trade flow.

This present environment has presented us futures prices in October of approximately $3.69 for December corn, $8.58 for November soybeans and $5.08 for December Chicago wheat. These are generally low prices, but they are not the lowest we’ve seen in the last couple of years. There is always an argument in farm country that we got to these prices because of overproduction in 2018. The other argument is that we got to these prices because the American administration was so difficult with their best customer the Chinese. It surely is a bit of both, but that does not give solace to the many American farmers who are finding a desperate, moribund cash market for their soybeans this fall.

Fast-forward to the November meeting in Argentina and we will hope for only good things. How about if the Chinese soybean tariff is lifted on American beans at the same time a devastating drought begins in South America? Simply put, it is easy to use agriculture within a trade war when things are abundant, but it is not so easy to sustain it if the supply becomes at risk. In 2018, supply is not at risk, but it could easily become that way if South America runs into problems.

As we move ahead, there should be some clarity as harvest advances and as the Argentina meeting gets closer. This crop is not in the bin yet but history tells us it’s only a matter of time. That will not be good for those forward grain futures curves. However, there is still much market flux in play beyond your farm horizon. This world needs food and the path on getting it often has many twists and turns.