USDA Goes Higher Again with Corn, Soybean Prices
Published: Friday, January 22, 2021
Continued decline in production and higher prices for grain are in the most current forecast by USDA.
According to UDSA's monthly crop projection report on Jan. 12, the corn yield estimate at 172 bushels per acre for the 2020 crop was down 3.8 percent from USDA's prediction in December.
A slightly more than 14 billion bushel crop nationwide is still sizable but down 2.2 percent from USDA's estimate the previous month.
USDA also came down slightly from its December estimate on the amount of corn used for ethanol to 4.95 billion bushels.
Jim Mintert, an agricultural economist at Purdue University, said the reason is economic margins for every gallon of ethanol produced have dropped from 56 cents in late October and early November to just two cents per gallon recently.
Shrinking margins came as production dropped from 4 percent to 5 percent less than a year ago during much of fall to 10 percent to 12 percent less than 12 months ago in December.
USDA also raised its estimate on the market year average price of corn from $4 per bushel last month to $4.20.
The USDA estimate for ending stocks on corn also came down by 150 million bushels from December to 1.55 billion bushels.
Jim Mintert, a farm economist at Purdue University, said ending stocks in June forecast at 3.3 billion bushels have declined largely because of higher than anticipated exports to China.
He said higher demand and lower than expected production is setting the stage for prices to possibly reach levels not achieved since the average price of corn sold for $4.46 per bushel in 2013, when supplies also tightened.
Mintert said ending stocks this year as a percentage of total usage was estimated by USDA at 10.6 percent compared to 9 percent in 2013.
"You have to think that's a potential target with respect to where this marketing year average price could wind up if we continue to see some strength. If we continue to see strong demand both in the export channels and domestically," he said.
Nathan Thompson, another farm economist at the West Lafayette campus, said there's not much incentive for farmers to keep a lot of corn in storage to try and sell later at a higher profit because of current prices trending favorably.
He said farmers would have to receive 18 cents per bushel more for their corn in July from current prices to make up for the cost of on-farm storage.
Prices would have to be 36 cents higher in July to break even on corn in commercial storage for six months, he said.
Placing a considerable amount of corn in storage might be a good choice for producers with "risk tolerance" and a "bullish outlook," he said.
"Just realize there's also a downside risk associated with that," Harrison said.
USDA lowered its estimate for soybean yields by a half bushel per acre from December to 4.14 billion bushels nationwide.
"That doesn't sound like much but in an environment where we already had a pretty tight supply situation that's enough to make a difference," Mintert said.
USDA also went higher with its estimate on soybean exports by 30 million bushels to 2.23 billion bushels.
"That would be the largest soybean exports on record," Mintert said.
Mintert citing USDA figures said soybean exports are up 78 percent over last year largely due to China rebuilding a hog population decimated by African swine flu.
USDA also increased its soybean price estimate by 60 cents per bushel from the previous month to $11.15.
Ending stocks are forecast at just over 3 percent.
Total ending stocks for soybeans are projected at 140 million bushels, an amount not seen also since 2013 when the average prices for soybeans was more than $13 per bushel.
"I think some people would probably argue we're getting pretty darn close to pipeline supplies. It's hard to pull that carry over down much more than that. Anything more than that would suggest you simply ration with respect to higher prices," Mintert said.
Mintert said the latest USDA projections reflect the many surprises from USDA in areas like ending stocks being much lower than original mid-year estimates.
"This was another case of things coming in a little more optimistic from a price standpoint and a little more negative from a production standpoint than expected," he said.
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