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February 25, 2020

Reaction to USDA's 2020 Outlook Conference

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

In their Annual Outlook Conference held last week, the USDA projected that U.S. farmers will plant 94.0 million acres of corn in 2020 with 86.6 million acres harvested for grain (92.1%). This would represent an increase of 4.3 million acres compared to the 89.7 million planted in 2019. They projected a yield of 178.0 bu/ac resulting in a production of 15.46 billion bushels.

For soybeans, they projected that farmers will plant 85.0 million acres and harvest 84.2 million acres (99.0%). This would represent an increase of 8.9 million acres compared to the 76.1 million planted in 2019. The nationwide soybean yield is projected at 49.8 bu/ac resulting in a production of 4.19 billion bushels.

I think their corn yield estimate of 178.0 bu/ac was conservative. It is 10 bu/ac greater than last year's yield, but only about 1.5 bu/ac greater than the corn yields of 2 and 3 years ago. With the potential for a wet and delayed spring in the upper Midwest, there is a possibility that some of the intended corn acres could be switched to soybeans. Additionally, they projected a significant increase in corn carryover which could continue put pressure on corn prices, which might favor soybeans over corn.

I also think they were conservative when they estimated the 2020 soybean yield at 49.8 bu/ac. That is 2.4 bu/ac more than last year, but 0.8 bu/ac less than two years ago and only 0.5 bu/ac better than three years ago. The soybean carryover came in significantly below expectations, which could help to support prices, but probably not between now and planting time.

Soybean prices face a lot of hurdles including: a record soybean crop in South America, devalued currencies in South America, China's struggles to control the coronavirus, and China's inability to commit to large soybean purchases, at least in the short term.

Another unknown this year is the total number of acres planted to the four main crops (corn, soybeans, wheat, and cotton). They estimated that there would be 236.5 million acres planted to these four crops in 2020, which is 1.8 million acres less than what was projected at last year's Outlook Conference. It is also 300,000 less than what farmers reported in last year's Prospective Plantings Report. The bottom line is that there might be more acres planted in 2020 than what was estimated in the Outlook Conference, but the springtime weather will be the determining factor.