The 2018 growing season was delayed by 10 to 14 days by an extended winter and wet planting season. But a warm May and lots of moisture combined with near-perfect June weather leading up to July 4 in most growing regions may increase growth and yield. As we have had for a number of years, it will be a buyer’s market regardless of how it shakes out. As usual, there are pockets of drought but nothing that will have a significant impact on either the corn or soybeans supply. The warm and dry May/June weather allowed for acreage expansion of nearly 1.6 million acres between corn and beans.
In late June, the U.S. Department of Agriculture (USDA) estimated that corn acres reached 89.128 million acres in 2018. In 31 of 48 states, the agency estimates flat or slightly lower acreage compared with 2017. That number is still higher than USDA’s March estimates of 88.03 million acres.
USDA’s corn stock estimates rose from 5.229 billion bushels last June to 5.306 billion bushels. USDA noted a divergent trend regarding on- and off-farm storage for corn stocks. On-farm corn stocks are at an estimated 2.75 billion bushels, down 3 percent from a year ago, while off-farm stocks of 2.56 billion bushels moved 7 percent higher this year. Disappearance of 3.59 billion bushels between March and May grew 5.9 percent year-over-year, according to USDA.
The USDA estimated soybean acres trended 1 percent lower from a year ago, with 89.557 million acres. That’s moderately higher than USDA’s March estimates of 88.99 acres.
Soybeans stored in all positions on June 1, 2018 totaled 1.22 billion bushels, up 26 percent from June 1, 2017. On-farm stocks totaled 377 million bushels, up 13 percent from a year ago. Off-farm stocks, at 845 million bushels, are up 33 percent from a year ago. Indicated disappearance for the March through May 2018 quarter totaled 888 million bushels, up 15 percent from the same period a year earlier.
All wheat acres, in contrast, are up 4 percent from a year ago, according to USDA, with 47.821 million acres. Spring wheat acres accounted for much of this boost, coming in at 13.202 million acres — significantly higher than USDA’s March estimates of 12.63 million acres.
Domestic wheat stocks fell slightly, from 1.181 billion bushels to 1.110 billion bushels, slipping 7 percent from last June. On-farm wheat stocks tumbled 32 percent from a year ago, reaching 130 million bushels. Off-farm stocks of 970 million bushels are just 2 percent lower than they were last June.
Disappearance between March and May totaled 395 million bushels, down 17 percent year-over-year.
In the U.S., we still need to ship our farm products, both crops and protein. Increased sourcing of product from the European Union, Asia, Australia and Brazil will create a vacuum in other markets which creates opportunities. The primary protein feed stock in the U.S. is corn and soybean meal, while the E.U. feeds primarily wheat. Energy prices have taken a significant swing higher in a range more sustainable for oil producers to regain profitability.
The international trade war between the U.S. and China could have short-term effects on both the protein markets and the feed ingredient markets. On July 6, China slapped a 25 percent tariff on imports from the U.S. This will probably affect pork and soybean markets the most. In addition, China has ordered state media not to report on comments from President Trump or U.S. officials because of the trade conflict. The notice indicates that China is trying to shield its citizens from news of trade dispute escalations with the U.S. They must manage their population’s discontent, which requires adequate supplies of quality protein among other things. It also seems Beijing is trying to not anger Western countries by censoring mentions of its “Made in China 2025” initiative. The timing is not particularly good for any of the sectors, but I expect some resolution to come prior to midterm elections in November. Both sides need a resolution long-term. The Chinese can’t live without U.S. trade markets and the food we provide to the many mouths they have to feed.
Until the trade situation clears up, it’s going to take some real weather to move the market higher. Every year is unique and the variables that are in play this can cause unforeseen changes. My recommendation is hedge on a low market while corn and soybeans are over supplied. Many of you have done this already based on the percent of the crop committed. NP
* Data from USDA’s report on June 29