From the wet, cold spring weather to the trade disputes to the swine fever crushing soybean demand [crushing: bean complex joke] the interplay of factors that pop-out a single end result, price, was really almost mind-boggling.
Talk about your complex-chaotic system, politics, overlaid on your complex-chaotic system, weather, overlaid on your complex-chaotic system, markets and I'm sure a few ag econ and market folks were left in the fetal position, drooling in the corner of the office.
From Agricultural Economic Insights, November 18:
Grain markets in 2019 had a familiar feel – a late June rally that faded as concerns about the U.S. corn and soybean crops subsided (see futures prices for corn here, soybeans here). This was especially frustrating for producers hoping for a substantial price improvement after spring planting challenges and record prevented planting acreage.
Given Mother Nature’s best efforts to implement a supply management plan, it’s worth stepping back and considering how much grain outlook conditions changes in 2019. This week’s post reviews how projections of grain production and ending stocks changed throughout 2019.
Corn
Figure 1 shows the U.S. corn ending stocks to use ratio since 2000. Additionally, the graph includes the projection from the USDA’s May WASDE Outlook (in orange). The May WASDE represents the early spring forecast – before the widespread planting challenges were evident.
Currently, U.S. corn ending stocks are 13.7% of usage. While stocks are projected to be the lowest in four years, they remain above the 20-year average (13.1%). Furthermore, they remain above the sub-10% level observed when corn prices soared. While the corn stock situation has improved in recent years, conditions remain on the high side.
Stepping back a bit, keep in mind that the USDA’s May projection was much bleaker. With corn stocks to use ratio at nearly 17%, corn stocks had a very real possibility of turning higher in 2019, especially if yields came in above-trend. Additionally, the spring outlook was for corn stocks at the 4th highest level in 20 years.
For a longer-term look at grain stocks, see our earlier post.
Figure 1. U.S. Corn Ending Stocks to Use, 2000/2001 to 2019/2020.
Includes May 2019 Projection for 2019/2020
(in orange). Data Source:
USDA PSD (Nov 2019).
Soybeans....MUCH MORE
While the story for soybeans is similar to that of corn, the magnitude is much more dramatic (Figure 2). In May, the USDA projected soybean ending stocks would exceed 23% of use, the highest level in 20 years, and slightly above 2018 levels....
