The U.S. Department of Agriculture’s recent Agricultural Outlook Forum presented a first look at the supply and demand projections for cotton, grains and oilseeds for the 2020-2021 crop year. The largest annual meeting of USDA, the forum is also the venue for USDA’s chief economist to unveil the department’s projections for U.S. commodity markets and trade. The balance-sheet projections from the forum will be updated in May in the World Agricultural Supply and Demand Estimates report. It will also include acreage information from USDA’s March “Prospective Plantings” report, which will include surveyed-farmer 2020 planting intentions.
Acreage, yield expectations detailed
The four principle crops – corn, soybeans, wheat and cotton – account for a projected 236.5 million total planted acres in 2020.
Corn-planted acres are estimated to increase to 94 million acres, a 4.8 percent increase from the 89.7 million acres in 2019. There was a record amount of acreage prevented from being planted in 2019 – 20 million acres. Returning to 94 million acres would align corn planting with 2016 planting levels. But yield expectations of 178.5 bushels per acres indicate 2020 would put corn production at a record 14.5 billion bushels.
The USDA projected soybean-planted acres to increase to 85 million acres in 2020, significantly more than the 76.1 million planted in 2019. But that’s not as much as the peak of soybean-planted acres in 2017, when 90.2 million acres of soybeans were planted. The national average soybean yield is currently projected at 49.8 bushels per acre, putting total estimated production at 4.2 billion bushels. That’s an 18 percent increase from 2019.
Projected-planted acres of wheat are estimated at 45 million acres in 2020. That estimate would reduce planted acres from 2019 levels when wheat-planted acres were at 45.2 million acres. The estimate would continue the reducing trend in wheat plantings. The fewest number of planted-wheat acres on record is projected for 2020. In addition to the estimates in wheat acres, wheat yields are projected less at 48.2 bushels per acre in 2020. That’s compared to 2019 when yields were 51.7 bushels per acre. At 1.8 billion bushels, total wheat production in 2020 is anticipated to decrease 4.4 percent from 2019, when wheat production was 1.9 billion bushels.
The cotton-planted-acres outlook decreases overall planted acres from 13.74 million acres in 2019 to 12.5 million acres, a decrease of 9 percent. The 14.1 million planted acres in 2018 was the largest amount of planted cotton acres since 2011. Cotton production in 2020 is estimated to decrease 3 percent, from 20.1 million 480-pound bales to 19.5 million 480-pound bales. But the national average cotton yield is anticipated to increase from 817 pounds per acre in 2019 to 855 pounds per acre in 2020. Figure 1 highlights planted acreage for corn, cotton, soybeans and wheat.
Demand estimates detailed
USDA forecasts total corn use to increase 4.8 percent from 2019, when total use was 14.07 billion bushels. Corn use in 2020 is forecast to be 14.74 billion bushels. But global competition has increased from production growth in places like Argentina, Brazil and Ukraine. Alongside a strong U.S. dollar, that has continued to weaken the U.S. ability to expand global corn-export market share.
Corn exports are projected to increase more than 18 percent from current 2019 estimates of 1.7 billion bushels. The forecast for 2020 is at 2.1 billion bushels.
At 5.45 billion bushels, ethanol use is anticipated to slightly increase for 2020, by 25 million bushels. The demand improvement in corn is not expected to keep pace with the supply increases. As a result ending stocks for corn are projected to increase to 2.6 billion bushels at the close of 2020, the most since 1987. The stocks-to-use ratio for corn is about 18 percent. As a result, early corn-price expectations for 2020 indicate $3.60 per bushel. That’s a decrease of 25 cents from the current crop, and less than the Price Loss Coverage support price of $3.70 per bushel.
Soybean total use is projected to increase by 6.3 percent from 2019 when it was 4.05 billion bushels. The forecast for 2020 is 4.3 billion bushels, a record in soybean total use. Soybean trade exports are projected to increase 12 percent for 2020 from 1.8 billion bushels in 2019. Exports are forecast to be 2.05 billion bushels in 2020. Soybean exports could improve as more information on Chinese purchase commitments and accumulated exports become available.
The increase in exports, as well as continued improvement in domestic crushing, is expected to decrease ending stocks in 2020 to 320 million bushels. That’s a decrease from 425 million bushels in 2019. The forecast would result in a stocks-to-use ratio of 7.4 percent in 2020. Ahead of actual trade-deal-commitment purchases, soybean prices are projected to be $8.80 per bushel in 2020. That’s a small increase from $8.75 per bushel in 2019. Despite the headwinds in the soybeans market during the past three crop years, soybean prices are expected to remain at more than the Price Loss Coverage support price of $8.40 per bushel.
Wheat total use is estimated to be slightly less from the 2.165 billion bushes in 2019. The forecast for wheat total use is 2.139 billion bushels in 2020. At 1 billion bushels, export projections from the USDA for the 2020 wheat crop hold constant to projections estimated for 2019. The estimated reduction in wheat production – due to acreage and yield declines – and overall reduced consumption will decrease ending stocks, from 940 million bushels in 2019 to 777 million bushels in 2020. The projected reduced stocks-to-use ratio is a decrease to 36 percent in 2020 from 43 percent in 2019. With that forecast comes an expected bump in price from $4.55 per bushel in 2019 to $4.90 per bushel in 2020. The season average wheat price is less than the Price Loss Coverage support price of $5.50 per bushel. Figure 2 displays total use for corn, soybeans and wheat.
The USDA is holding estimates for cotton use – both domestic use and exports – at 19.5 million 480-pound bales. That estimate is constant from the 2019-2020 marketing year to 2020-2021. Projected ending stocks of cotton for 2020 are declining for the first time in four years, slipping from 5.4 million 480-pound bales in 2019 to 5.3 million 480-pound bales. But the stocks-to-use ratio has remained about the same since 2018, at 27 percent. A slight reduction in ending stocks contributed to a slight increase in cotton prices in 2020, moving from 62 cents per pound in 2019 to 64 cents per pound in 2020. Figure 3 displays cotton domestic use and export amounts.
For the soon-to-be-underway 2020 growing season, the USDA is projecting corn and soybean acres, yield and production to increase following the adverse planting and growing conditions experienced this past year. Meanwhile wheat and cotton acres as well as production are expected to decline this year.
Demand improvement for soybeans and wheat as well as flat demand for cotton are expected to decrease ending inventories across all three crops. They are likely to lead to increased prices in 2020. For corn the pace of supply growth is likely to exceed that of demand. Corn prices are expected to decrease in 2020 as inventory is expected to increase to an all-time record.
While the recently unveiled 2020 crop outlook projects some crops to rebound following the challenges of 2019, the poor conditions of the farm economy persist. Crop insurance and government-support payments helped to support farm income during a trying 2019. Reduced interest rates kept asset values strong and farm debt-to-asset ratios small. They contributed to reduced debt-financing costs.
For 2020 expectations of slowing world gross-domestic-product growth and coronavirus-related market disruptions have created additional uncertainty. Looking ahead, agricultural markets are anxiously waiting for confirmation of China “Phase 1” commodity purchases before shifting to a more-optimistic position.