November 12, 2018

USDA LOWERS CORN AND SOYBEAN YIELD PROJECTIONS

In most instances, when USDA projects a large crop for a given year, it usually gets even bigger as the crop is harvested; however, the 2018 crop year will be different, based on the recently released November 8 USDA Crop Report. In the November Report, USDA decreased the projected national average corn yield by 1.8 bushels per acre and decreased the total 2018 U.S corn production by 152 million, compared to October USDA estimates. The estimated national average soybean yield was decreased by one bushel per acre and the total 2018 soybean production level was reduced by 90 million bushels, compared to October levels.

The latest USDA Report estimated the total U.S. corn production for 2018 at nearly 14.63 billion bushels, which trails only the 2016 record U.S. corn production of 15.15 billion bushels. The projected 2018 corn production would be similar to the production level of 14.60 billion bushels in 2017; however, it would exceed the 13.6 billion bushels in 2015. USDA is still estimating the 2018 national average corn yield at the record level of 178.9 bushels per acre, which surpasses last year’s record yield of 176.6 bushels per acre. The 2018 corn yield estimate also compares to other recent U.S. corn yields of 174.6 bushels per acre in 2016, 168.4 in 2015, and 171 in 2014. The projected 2018 U.S. harvested corn acreage is 81.8 million acres, which is down slightly from 82.7 million acres last year.

The USDA Report estimated 2018 U.S. soybean production at the record level of 4.6 billion bushels, surpassing last year’s record of nearly 4.41 billion bushels, and compares to 4.3 billion bushels in 2016. USDA is estimating a record U.S. soybean yield in 2018 at 52.1 bushels per acre, which is just above the previous record soybean yield of 52.0 bushels per acre in 2016. The 2018 yield compares to 49.3 bushels per acre in 2017 and 48 bushels per acre in 2015. The 2018 harvested soybean acreage is projected at 88.3 million acres, which is down from the record level of 89.5 million acres in 2017.

Based on the November USDA Report, Minnesota is projected to have a 2018 corn yield of 184 bushels per acre, which was lowered 7 bushels from the October estimate and is 10 bushels per acre below last year’s record corn yield of 194 bushels per acre. The 2018 State estimate also compares to average yields of 193 bushels per acre in 2016, 188 bushels per acre in 2015, and 156 bushels per acre in 2014. USDA is estimating the 2018 Iowa corn yield at 198 bushels per acre, which was lowered by 6 bushels from the October estimate, and compares to 202 bushels per acre in 2017 and the State record yield of 203 bushels per acre in 2016. Other estimates for 2018 average corn yields are Illinois at 210 bushels per acre, compared to 201 bushels per acre in 2017, Indiana at 194 bushels per acre, compared to 180 bushels per acre in 2017, Nebraska at 195 bushels per acre, compared to 181 bushels per acre in 2017, South Dakota at 166 bushels per acre, compared to 145 bushels per acre in 2017 and North Dakota at 146 bushels per acre, compared to 139 bushels per acre in 2017.

USDA is estimating the 2018 Minnesota soybean yield at 50 bushels per acre, compared to last year’s yield of 47.5 bushels per acre, the record yield of 52 bushels per acre in 2016, and 50 bushels per acre in 2015. The 2018 Iowa soybean yield is estimated at 58 bushels per acre, compared to 57 bushels per acre in 2017 and the 2016 record yield of 60 bushels per acre. Other projected State soybean yields for 2018 are Illinois at 64 bushels per acre, compared to 58 bushels per acre in 2017, Indiana at 60 bushels per acre, compared to 54 bushels per acre in 2017, Nebraska at 61 bushels per acre, compared to 57.5 bushels per acre in 2017, South Dakota at 49 bushels per acre, compared to 43 bushels per acre in 2017, and in North Dakota at 36 bushels per acre, compared to 34.5 bushels per acre in 2017.

USDA SUPPLY AND DEMAND REPORT

The monthly USDA World Supply and Demand Estimates (WASDE) Report released on November 8 for corn and soybean markets in the coming months. The WASDE Report showed a lower overall 2018-19 U.S. corn supply estimates than those that existed in 2017-18, as well as increased corn demand levels, which resulted in a significant reduction in corn carryout levels by the end of the 2018-19 marketing year. The surprising data in the WASDE Report was the near doubling of expected world corn carryout levels by the end of 2018-19, compared to the October estimates, which was mainly due to adjustments in the estimated corn supply in China.

The record projected 2018 U.S. corn yields were offset by a slight reduction in the estimated 2018 harvested corn acreage, which kept the estimated total corn production in 2018 very similar to a year earlier. Total demand for corn usage in 2018-19 was increased from 2017-18 levels, due to expected slight increases in the amount of corn used for livestock feed and ethanol production, as well as a slight increase in corn export levels for the year.

USDA is now estimating 2018-2019 U.S. corn ending stocks at just under 1.74 billion bushels, which would be at the lowest level since the 2015-16 marketing year. The estimated 2018-19 ending stocks compares to carryout levels of 2.14 billion bushels in 2017-18 and 2.29 billion bushels in 2016-17. The U.S. corn carryout to use ratio would be at 11.5 percent for 2018-19, which is at the lowest level in several years, and compares to 14.5 percent in 2017-18 and 15.7 percent in 2016-17. This means there could be potential for some short-term rallies in the cash corn market in the coming months, especially if USDA makes further downward adjustments in the final 2018 U.S. average corn yield.

The 2018-19 U.S. soybean ending stocks in the WASDE Report were estimated at 955 million bushels, which is the highest level in decades and is more than double the 2017-18 ending stocks of 438 million bushels. The 2018-19 soybean carryout level is also considerably higher than the ending stock levels of 302 million bushels in 2016-17 and 197 million bushels for 2015-16. The soybean carryout-to-use ratio for 2018-19 is estimated at 23.3 percent, compared to just over 10 percent for 2017-18 and near 7 percent for 2016-17. Soybean demand for 2018-19 is projected to decrease by nearly 190 million bushels compared to a year earlier, primarily due to decreases in soybean export levels to China. The expected large increase in soybean ending stocks is likely to limit significant rallies in farm-level soybean prices in the coming months, unless there is some resolution to the China trade situation.

USDA is currently estimating the U.S average on-farm cash corn price for 2018-2019 in a range of $3.20-$4.00 per bushel, or an average of $3.60 per bushel, which was an increase of $.10 per bushel from the October estimate. The 2018-19 USDA price estimates are the expected average farm-level prices for the 2018 crop from September 1, 2018 to August 31, 2019; however, they do not represent estimated prices for either the 2018 or 2019 calendar year. The projected USDA average on-farm corn price of $3.60 per bushel for 2018-2019, compares to national average corn prices of $3.36 per bushel for both 2017-18 and 2016-17, $3.61 per bushel for 2015-16, and $3.70 per bushel for 2014-15.

USDA is projecting the U.S. average soybean price for 2018-2019 in a range of $7.60-$9.60 per bushel, resulting in a farm-level average soybean price of $8.60 per bushel, which is the same as the October estimate. The soybean price estimate of $8.60 per bushel for 2018-19, compares to $9.35 per bushel for 2017-18, $9.47 per bushel in 2016-17, and $8.95 per bushel for 2015-16.

**********************************************************************************

Note — For additional information contact Kent Thiesse, Farm Management Analyst and Senior

Vice President, MinnStar Bank, Lake Crystal, MN. (Phone — (507) 381-7960);

E-mail — (kent.thiesse@minnstarbank.com)