USDA Wobbles, Corn Supply Disruption Ahead

In my career I have never been a big one for planting soybeans early. Even though I live in the most southern part of Canada, planting soybeans about June 1st always was good for my soul. I never liked planting into cold soils, I always like that hot ground and hot temperatures come June. Little did I know that the spring of 2019 would come along with almost continual unfit ground due to constant rain. Another 4/10 of an inch of rain this morning has just added to the challenge.

Enough about me, even though that mirrors much of what has gone on across Ontario the spring. Clearly, there’s been a problem in the Eastern corn belt, which now even the USDA recognizes. Last Monday the USDA said that 83% of US corn had been planted and 60% of American soybeans. At first glance those numbers can be massaged as not too bad, but it is really making a difference. Large swaths of the Eastern corn belt including Illinois are having a hard time getting corn planted. In my case I threw the towel in. The unspoken truth in the United States is the switch to soybeans is on. At a certain point planting corn doesn’t work at these calendar dates in North America.

On June 11th the USDA weighed in with their latest WASDE report. Clearly, they were watching the problems in farm country as they cut US corn yield 10 bushels per acre even before the entire crop was planted. This was unprecedented and something I’ve not seen to that degree in my career. To top it off, the USDA also reduced expected planting acres by 3 million at 89.8 million acres. This is down from the big intentions in March and it might not be over as of yet. You cannot plant in mud and water and that is what many of us are facing across the Eastern corn belt this year.

On June 11th corn futures were actually down about $.05-$.06 a bushel on the day when the report was released but quickly rallied up $.12 on the December futures when the report was released. There is something about reality that can wake up the trade. The pre-report trade estimate for corn yield had been around 170 bushels per acre, much higher than the 166 bushel per acre estimate. The USDA corn ending stocks have been reduced by over 810 million bushels below there May estimate and this has raised the USDA price estimate to $3.80.

The USDA numbers are putting an official face on what many people think is much worse. I didn’t plant more corn in Ontario into mid-June because the chances of it working for me were not very good. It has to do with yield, moisture, test weight and the Canadian winter. In the great corn country south of me in the United States where they’re not planted, they have much better chances. However, it is clear to many farmers that even some of the corn that is planted is highly compromised with regard to yield, test weight and a host of other things. Then there is that corn that is not planted, which won’t be and we know it won’t yield well either. Clearly, the corn landscape has changed.

The USDA was much quieter about soybeans with no change to the soybean acreage or the yield from the March or the May USDA report. Ending stocks are in the stratosphere currently 1.04 5 billion bushels. The yield estimate is still being put at 49.5 bushels per acres and the hope for good soybean yields is still in the mix. Unfortunately, for many of us who are switching to soybeans, the problems in the corn complex cannot be translated into bullishness for soybeans.

Soybean demand remains a huge problem. It is retreating as the most voracious soybean consumer in the world China recoils. There was a drop in month-to-month demand into China last month due to whatever. It might be African swine fever and of course it might just be a drop in demand based on trade posture. However, with a billion bushels of old crop soybeans still on the ground in the United States, none of this is good.

It is what it is. Clearly though, 2019 is going to be a game changer because we are going to have supply disruption especially in corn. I don’t really talk about the weather forecast anymore, simply because I only need one thing and that is for it to dry up. However, both the noncommercial and commercial interests in the corn market are turning bullish, possibly in a big way. They might’ve been late to the party, but that’s just the way risks are taken sometimes. I still like planting soybeans in June. However, it’s getting old.