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USDA-WASDE FORECAST #605 October 9th 2020

10/09/2020

OVERVIEW

The October 9th 2020 USDA WASDE Report was updated from the September edition reflecting drought conditions and the August 10th derecho with consequences to corn and soybean harvests. October projections are based on updated estimates of harvest area and yield. The corn acreage to be harvested is currently estimated at 82.5 million acres, down 1.0 million acres from the September 11th WASDE report. Soybeans will be harvested from 82.3 million acres, down 0.7 million acres from the September 11th WASDE report.

 

The October 2020 WASDE estimate of corn yield was lowered fractionally to 178.4 bushels per acre, (168.0 bushels per acre in 2019). The projection of soybean yield was unchanged at 51.9 bushels per acre. (47.4 bushels per acre in 2019)

 

The October USDA projection for the ending stock of corn was decreased by 13.4 percent to 2,167 million bushels. Due to decreased supply and exports the ending stock for soybeans was reduced by 36.9 percent to 290 million bushels.

 

Projections for ending stocks of both corn and soybeans have influenced recent CME price quotations concurrently with increased compliance with the Phase-One trade agreement with China. The September WASDE projected the corn price at $3.60 per bushel and soybeans at 980 cents per bushel.

 

It is presumed that projections are based on the assumption that China will as far as possible honor commitments that were disrupted during the first quarter of 2020 by COVID-19. China booked substantial orders for corn and soybeans delivered through August for the 2019-2020 market year in addition to large quantities booked from September onwards for the 2020-2021 market year. Reports on export volumes of commodities to China will be included in upcoming editions of CHICK-NEWS and in subsequent mailings as data becomes available.

 

CORN

The corn harvest for 2020 documented in the October 2020 WASDE Report #605 is projected at 14,722 million bushels consistent with actual planting data and crop progress. The projected 2020 harvest can be compared to 2019 at 13,692 million bushels and is 2.8 percent lower than the previous 2016 record harvest of 15,148 million bushels. The “Feed and Residual” category was reduced by 1.7 percent to 5,775 million bushels. The “Ethanol and Byproducts” category was lowered to 5,050 million bushels despite reduced domestic demand for E-10 due to COVID-19 restrictions and competitive export markets. Corn exports were retained at 2,325 million bushels in the face of intense competition from Brazil and Argentine and high world domestic coarse grain production relative to demand. Ending stocks were decreased by 349 million bushels (13.4 percent) to 2,167 million bushels.

The forecast USDA farm price for corn was raised by 10 cents to 360 cents per bushel. Near close of trading on October 9th after release of the WASDE the CME quotations for December and March corn were 394 cents and 402 cents per bushel up 7.7 percent and 8.9 percent respectively from quotations on September 11th.

 

OCTOBER 2020 WASDE #605 PROJECTIONS FOR THE 2020 CORN HARVEST:

Harvest Area

82.5 m acres

(91.0 m. acres planted, harvest corresponding to 90.7% of acres harvested)

Yield

178.4 bushels per acre

(was 178.5 bushels per acre in Sept. WASDE.)

Beginning Stocks

1,995 m. bushels

Production

14,722 m. bushels

Imports

25 m. bushels

Total Supply

16,742 m. bushels

Proportion of Supply

Feed & Residual

5,775 m. bushels

34.5%

Food & Seed

1,425 m bushels

 8.5%

Ethanol & Byproducts

5,050 m. bushels

30.2%

Domestic Use

12,250 m. bushels

73.2%

Exports

2,325 m. bushels

13.9%

Ending Stocks

2,167 m. bushels

12.9%

Stock-to-domestic use proportion

17.7%

(Was 20.2 % in the September 2020 WASDE Report)

1 metric ton = 39.368 bushels

Average Farm Price: $3.60 per bushel. (Up 10 cents per bushel from the September 2020 WASDE Report)

 

SOYBEANS and SOYBEAN MEAL

USDA projected the 2020 soybean crop to attain 4,268 million bushels, down 1.0 percent from the September value. The 2020 harvest is based on a yield of 51.9 bushels per acre. With respect to use parameters crushings were retained at 2,180 million tons. Projected exports were increased 3.5 percent to 2,200 million bushels, based on orders from China during the fourth quarter of 2020 in accordance with the Phase-One Trade Agreement. In early September prices increased in response to bookings for the 2020-2021market year. Prior to 2018 our largest trading partner imported the equivalent of 25 percent of U.S. soybeans. Ending stocks were adjusted downward from 460 million bushels in September to 290 million bushels in the October WASDE.

 

The USDA projection of the ex-farm price for soybeans for the 2020 harvest is 980 cents per bushel, up a noteworthy 55 cents per bushel from the September 2020 WASDE estimate. Near close of trading on October 9th and following release of the WASDE, the CME quotations for soybeans for January and March 2021 delivery were 1,065 cents and 1,047 cents per bushel up 3.9 percent and 5.0 percent respectively compared to the values on September 11th for September and December 2020 delivery.

 

Projected supply of soybean meal was held at 52.2 million tons. Domestic use was unchanged at 38.3 million tons. Exports were unchanged at 13.5 million tons. The USDA increased the ex plant price of soybean meal to $335 per ton up $20 per ton. Near close of trading on October 9th CME quotations for October and December 2020 deliveries of soybean meal were $362 and $364, higher by 14.2 and 12.0 percent respectively compared to the September 11th quotations.

 

OCTOBER 2020 WASDE #605 PROJECTION FOR THE 2020 SOYBEAN HARVEST AND SOYBEAN MEAL PRODUCTION:-

Harvest Area

82.3 m acres

(83.1 m. acres planted, harvest corresponding to 99.0% of planted acreage)

Yield

51.9 bushels per acre

(Was 53.3 bushels per acre in the Aug. WASDE)

Beginning Stocks

523 m. bushels

(Was 575 m. bushels in Sept. 2019 WASDE)

Production

4,268 m. bushels

Imports

15 m. bushels

Total Supply

4,806 m. bushels

Proportion of Supply

Crushings

2,180 m. bushels

45.4%

Exports

2,200 m. bushels

45.8%

Seed

100 m. bushels

 2.1%

Residual

36 m. bushels

0.7%

Total Use

4,516 m. bushels

94.0%

Ending Stocks

290 m. bushels

6.0%

(Was 460 m. bushels in the Sept WASDE)

1 metric ton = 76.34 bushels

Average Farm Price: 980 cents per bushel (Up 55 cents per bushel from September WASDE Report)

OCTOBER 2020 PROJECTION OF SOYABEAN MEAL PRODUCTION AND USE

Beginning Stocks

0.400 m. tons

Production

51.400m. tons

Imports

0.400 m. tons

Total Supply

52.200 m. tons

Domestic Use

38.300 m. tons

Exports

13.500 m. tons

Total Use

51.800 m. tons

Ending Stocks

0.400 m. tons

Average Price ex plant:$335 (Up $20 per ton from the September 2020 WASDE Report)

 

IMPLICATIONS FOR PRODUCTION COST

The price projections based on CME quotations for corn and soybeans suggest low to stable production costs for broilers and eggs. Going forward, prices of commodities will be determined by World supply and demand and U.S. domestic yield, use and exports.

  • For each 10 cents per bushel change in corn:-
  • The cost of egg production would change by 0.45 cent per dozen
  • The cost of broiler production would change by 0.25 cent per live pound
  • For each $10 per ton change in the cost of soybean meal:-
  • The cost of egg production would change by 0.40 cent per dozen
  • The cost of broiler production would change by 0.25 cent per live pound.

 

WORLD SITUATION

With respect to world coarse grains and oilseeds the August WASDE included the following appraisals:-

“Global coarse grain production for 2020/21 is forecast lower to 1,458.8 million tons. The 2020/21 foreign coarse grain outlook is for higher production, increased use, and greater stocks relative to last month. Foreign corn production is forecast modestly higher with increases for several countries, including Serbia, Ghana, Kenya, Tanzania, Burkina, and Mali more than offsetting declines for Ukraine and the EU. The projected corn yield for Ukraine is lowered based on reported harvest results to date.

 

Corn exports are raised for Serbia but lowered for Ukraine and the EU. For 2019/20, corn exports for Argentina are raised for the local marketing year beginning March 2020 based on larger-than-expected shipments through September. For 2020/21, corn imports are lowered for the EU, Iran, and Kenya, but raised for Saudi Arabia, Vietnam, and Iraq. Foreign corn ending stocks are higher, mostly reflecting increases for Mexico, the EU, and Canada. Global corn ending stocks, at 300.5 million tons, are down 6.3 million from last month”.

 

“The 2020/21 foreign oilseed production is lowered 2.6 million tons to 478.9 million mainly on lower sunflower seed production for Ukraine, the EU, Moldova, and Argentina. Ukraine’s sunflower seed output is lowered 2 million tons to 15 million on drought conditions during the season and harvest results to date. Dryness also impacted yield prospects for Romania, Bulgaria, and Moldova. Lower sunflower seed production for Ukraine results in lower global sunflower meal and oil exports. Partly offsetting are higher exports of palm oil from Malaysia and rapeseed meal from Russia.

 

The 2020/21 foreign soybean supply and demand forecasts include lower beginning stocks, higher crush, and lower ending stocks. Beginning stocks are lowered mainly on higher 2019/20 crush for China that is partly offset by lower exports and higher stocks for Brazil. The 2020/21 soybean imports, crush, and meal consumption are higher for China, Bangladesh, Thailand, and Vietnam, aligning with prior year increases in domestic meal use. Argentina’s exports are lowered 0.5 million tons due to stronger competition from the United States. With lower supplies in the United States and higher foreign use, global ending stocks are reduced 4.9 million tons to 88.7 million.

 

Updated World production and use of total grains and oilseeds is summarized for the 2020/2021 season taking into account Northern and Southern Hemisphere production:-

Factor: billon m. tons

Coarse Grains

Oil Seeds

Output

1.459

606

Supply

1.791

714

World Trade

223

191

Use

1.461

515

Ending Stocks

331

101

(1 metric ton corn= 40 bushels) (“ton” represents 2,000 pounds)