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Supply, Demand Favors Soybeans More Than Corn


by Stan Maddux

Published: Friday, October 16, 2020

Higher demand and lower supplies forecast by USDA appear to be driving a long awaited increase in the price of grain.

The returns on soybeans have especially been helped with the average price of soybeans for 2020 predicted to be the highest since 2014.

According to the latest USDA crop outlook report published last Friday, the average price of soybeans this year should be $9.80 per bushel compared to $8.57 last year and $8.48 in 2018.

In response to the report, Jim Mintert, an agricultural economist at Purdue University, said during a Friday webinar the price of soybeans has already gone up more than a $1 per bushel in the last two months.

"It's a huge change in prices," he said.

USDA also revised the amount of planted soybeans this year to 700,000 acres fewer than the 83.2 acres originally predicted.

There was no change in USDA's soybean yield estimates, with states like Indiana, Michigan and Wisconsin projected to have record harvests and other areas impacted more by weather to see lower yields than originally forecast.

USDA also forecast an additional 75 million bushels in soybean exports and ending stocks for U.S soybeans at 6-percent this year.

Ending stocks for U.S soybeans in 2019 were 13 percent and 23 percent in 2018.

"This is a dramatic turnaround that explains the strength in soybean prices we've seen recently," Mintert said.

"We got supply going down and demand going up," said Michael Langemeier, another Purdue University agricultural economist at the West Lafayette campus.

USDA reduced its estimate for planted corn this year by 1 million acres to 91 million acres.

USDA also predicted 14.9 billion bushels of harvested corn this fall, or about 1 billion bushels less than previously forecast.

While the use of corn for ethanol production was forecast to be 50 million bushels less than 2019, USDA predicted corn exports would be 31 percent above 2019.

The latest USDA forecast also placed ending stocks for corn at 15 percent when 17 percent was predicted last month and 20 percent was anticipated in July.

"This is a big change in a short span of timae. It's a big shift," Mintert said.

As a result, USDA has revised its average price estimate for corn this year from $3.50 per bushel last month to $3.60 presently.

This year's average price for corn was estimated by USDA at $3.10 per bushel two months ago.

Mintert said soybean producers might be tempted to wait to see if prices go up even further in the coming months before selling what they have in storage.

He said current prices are pretty attractive, though, and a lot of uncertainty that remains in the market could have negative impact on prices in the future.

"There's a lot of downside risk to holding on to soybeans," Langemeier said.

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