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Trade War Limits Outlet for Smaller-Than-Usual U.S. Corn and Soy Crops
U.S. farmers will harvest their smallest corn and soybean crops since 2013, but the trade war will constrain exports of America’s two major crops for the second year in a row, forecast the USDA on Monday. Soybeans would sell at the lowest average price at the farm gate in 13 years.
The USDA lowered its estimate of corn and soybean exports by 100 million bushels apiece for the marketing year that begins on Sept. 1. U.S. stockpiles will remain ample, equal to an eight-week supply of corn and 10 weeks of soybeans at the end of the 2019/20 trade year. The lower soy forecast reflects “reduced global import demand, mainly for China,” said the USDA. U.S. corn exports face increasing competition from Brazil and Argentina, beneficiaries of the trade war.
Despite the rainiest spring in a quarter-century, growers planted a surprising 90 million acres of corn, according to a re-survey of the Farm Belt — well above expectations. The USDA estimate of corn yield was also higher than expected, so its estimate of the corn crop was 800 million bushels larger than traders expected. Futures prices plummeted by 25 cents a bushel for corn, the maximum allowed, at the Chicago Board of Trade. Soybean futures were pulled down by 13 cents a bushel by the plunge in corn.
Analysts said farmers may have been motivated by a Trump administration decision to base trade war payments on a farm’s planted acreage. Ten percent of producers polled by Purdue University in July said their corn plantings were influenced by the rule. “This coupling may have been key … may have actually sealed the doom of the corn market this year,” said economist Scott Irwin of the University of Illinois on social media.
In the three years before the Sino-U.S. trade war, the United States exported an average of 2.1 billion bushels of soybeans and 2.2 billion bushels of corn annually. The USDA forecasts for the 2019/20 trade year are 1.775 billion bushels of soybeans and 2.050 billion bushels of corn. China used to import one in every 3 bushels of soybeans grown in the United States. This year’s soybean crop will fetch an average of $8.40 a bushel, estimated the USDA, the lowest season-average price since $6.43 for the 2006 crop.
In its first estimate of the fall harvest, the USDA forecast a corn crop of 13.9 billion bushels, soybeans of 3.68 billion bushels, and cotton of 22.5 million bales weighing 480 pounds each. While the corn and soybean harvests would be the smallest since 2013, the cotton crop would be the largest in 14 years. The wheat crop, harvested mainly in the spring and summer, was forecast at 1.98 billion bushels, 5 percent larger than last year.
Hot and dry weather has damaged the wheat crop in Russia and the EU, two leading U.S. competitors in the world wheat market. Although U.S. exports are forecast to rise in the 2019/20 trade year, the wheat inventory will remain high, at roughly a six-month supply.
The USDA surveyed approximately 20,800 producers, mostly by telephone, about probable yields but it did not conduct its usual spot checks of corn and soybean fields in August. The “objective yield survey” will begin in September. The margin of error for USDA corn estimates in August is 6.2 percent, or 305 million bushels. For soybeans, it is 11.4 percent, or 152 million bushels, and for cotton, 12.8 percent or 1.14 million bales.