The USDA issued another monthly World Agricultural Supply and Demand Estimates (WASDE) report on Friday, with the results providing further bearish fodder for markets already under pressure from existing oversupply and negative trade news. Each year, the May WASDE report is highly anticipated because it includes the initial forecasts for the upcoming growing season. This year’s release did not disappoint, as estimates of corn and soybean ending stocks for the 2019/20 crop year exceeded trade expectations.
In the US, corn production is expected to rise to 15.030 billion bushels, the second largest output on record, mainly due to a 3 million acre increase in area planted to corn from 2018. Farmers are expected to rotate acreage from soybeans into corn after the price spread between the two crops shifted dramatically in corn’s favor last year. The USDA’s corn yield expectation, which is based on weather-adjusted trend and assumes normal planting and summer growing weather, is for a slight decline to 176.0 bushels per acre, from 176.4 bushels per acre last year. Gro Intelligence’s yield model, which combines geospatial and ground-based data, is currently forecasting corn yield of 166.8 bushels per acre.
On the demand side, total usage is expected to increase to 14.675 billion bushels, mainly driven by higher domestic feed use than last year. However, exports are projected lower on record South American production. Overall, US corn inventories are projected to rise to 2.485 billion bushels at the end of the 2019/20 crop year. Globally, corn inventories are expected to decline from 326 million tonnes to 315 million tonnes in the 2019/20 marketing year. However, excluding China, stocks are expected to rise by almost 7 million tonnes. Global corn demand is projected to increase 1% to 1,145 million tonnes, offsetting record production of 1,134 million tonnes.
The USDA’s 2019/20 US soybean outlook is for higher crush and exports, and lower production, leading to slightly lower ending stocks compared to 2018/19. Soybean production is expected at 4.150 billion bushels, down 394 million from last year’s record crop. Planted area is projected to decline by more than 4 million acres, and yield is also expected to fall to 49.5 bushels per acre from 51.6 bushels per acre in 2018. Gro’s US soybean yield estimate for 2019 is currently 48.73 bushels per acre. Ending stocks are expected to fall to 970 million bushels, easily the second-most ever following 2018’s record stock build. The USDA expects world soybean inventories to essentially remain flat at 113.09 million tonnes, as the outbreak of African Swine Fever outbreak will suppress Chinese feed use and lead to below-trend demand growth.