Market: Store corn, market soybeans

Soybean growers are finishing a wild year with unpredictable peaks and valleys with more to be happy about than farmers who planted corn.

That’s the picture that emerged from the latest U.S. Department of Agriculture Crop Production Report and World Agricultural Supply and Demand Estimates. The reports were discussed in an Oct. 9 webinar presented by Jim Mintert, Michael Langemeier and Nathan Thompson of the Purdue Center for Commercial Agriculture.

Yield reductions

Corn estimates were down from earlier forecasts, with planted acreage reduced by 1 million acres to 91 million acres. The “shock,” said Mintert, was a total U.S. corn production estimate of 14.9 billion bushels, down from the 16 billion bushels forecast in the spring. Harvested acreage estimates also reduced by 1 million acres to 82.5 million acres total. A combination of yield reduction and a decline in harvested acres reduced yield estimates to 178.4 bushels per acre from September. The total corn supply, said Mintert, is close to where the total was two or three years ago. Yield estimates were down in “derecho belt” Midwestern states like Illinois, Iowa, Nebraska and South Dakota, while some eastern states saw increased yields. Beginning stocks were reduced from the Sept. 1 estimates by 258 million bushels. The reduced yields pulled down ending stocks from 17% of total usage in Sept. to 15% in October.

On the demand side, said Mintert, ethanol usage was down by 50 million bushels, as was feed usage. There was no change in the forecast for corn exports. Corn prices averaged $3.60 a bushel, up from $3.10 two months ago. Thompson said the market’s message was to store corn; “Don’t expect the spread [of 14 cents per bushel] to widen much more.” Geographically, said Mintert, basis levels are stronger in areas closer to the Mississippi River.

Soybean prices up

Soybeans also saw planted acreage reduced by .7 million acres, to a total of 83.1 million acres, from the September estimates. Beginning stocks were reduced by 52 million bushels; the total supply was 4.8 million bushels. Combined with a smaller carryover from last year and export demand, that raised soybean prices. An additional l75 million bushels for export were projected, with no change in the domestic crush estimate. Ending stocks were only 6% of total usage, resulting in a forecast price of $9.80 per bushel, the highest since 2012 and slightly above 2015 prices.

In contrast to corn, market signals for soybeans are encouraging farmers to sell now, panelists agreed. Langemeier said there would be “lots of downside risk to holding on” to soybeans. The only reasons to store might be to hedge against possible future China buys or future tight supplies, but there’s risk in either course, he said. Mintert agreed: “My [advice] is to store corn and market soybeans.”

Farm incomes up, but working capital needs rebuilding

Perhaps surprisingly to some, the panel said, farm incomes are projected to be at their highest since 2013, at least in central Indiana. That’s due mostly to a jump in government payments, however. The profit margin is still lower than the long-run average, as it has remained since 2015, although with a modest bump from last year, said Mintert. Langemeier wondered whether some farmers might consider buying machinery, but Mintert said most farmers will rebuild working capital first.

On one encouraging note, downward pressure on cash land rents (in central Indiana) has “evaporated,” panelists said. But Mintert said it would be “premature” to speak of any increases in cash rents for 2021 yet.

David Murray can be reached at [email protected].