Weekly Market Recap and Tom's Take June 12, 2020

Agronomy Crop Nutrients 2 Landus Cooperative

Market Recap:

July corn futures ended the day at $3.30, down 1 1/4 since last Friday. December corn was down 3/4 today to $3.43, down 2 1/4 this week.

July soybeans finished 5 1/4 higher at $8.71 1/4, up 3 1/2 from last Friday. November beans were up 3 today, ending at $8.79 3/4, up 1/4 for the week.

The Big Story this week was the release of the USDA’s June WASDE report on Thursday. The main element from this report is ending stocks. For 2019/20 corn, ending stocks came in 66 million bu. below the average estimate and on the lower end of the range of estimates at 2.103 billion bu. That was up 5 million from the USDA’s last estimate but down 118 million bu. from last year. It looks like this was mainly due to cutting North Dakota’s crop by 45 million bu. and reducing their harvested acreage by 100,000. No changes to 2019/20 corn exports or feed/residual use, but ethanol usage was reduced by 50 million. We’re still not sure this will be enough to match ethanol usage vs. production by the end of the marketing year. No changes to the 2020/21 corn balance sheet, just the carryover of the 5 million bu. increase from old crop ending stocks bringing next year’s ending stocks to 3.323 billion bu.

2019/20 ending stocks for soybeans came in 8 million bu. above the average estimate at 585 million. This was up 5 million from the USDA’s previous estimate, but still 324 million LESS than last year. 2019/20 exports were reduced by 25 million, which seems minimal. Soybean export sales will need to average 4.2 million bu. per week through the end of August to meet USDA’s projections. Crush was raised 15 million bu., which will require May through August crush to run 1.6% above last year’s pace, but that feels achievable. Finishing up with a look at soybean ending stocks for 2020/21, those were within the range of estimates but behind the average estimate at 395 million bu. That was up 10 million from the USDA’s previous report, but also 190 million BELOW last year. Generally, the feeling is there were no real surprises in this report – stocks are “slightly” higher, exports and usage seem to be mostly on track.

For more information about the WASDE and other items impacting corn and soybean prices, please tune in to our weekly Bull Bear Banter podcast: https://landuscooperativeexperience.podbean.com/

And now, for Tom’s Take:

I’ve been thinking a lot about the corn carryout for next year. 3.323 BILLION BUSHELS! I don’t know about you, but I have a hard time visualizing that much corn. How do I even try to get my mind wrapped around anything that large?

I guess I’ll start where I always do, with my first full-time job, working at my Dad’s grain elevator. Built in the late ’50s/early ’60s, we had 3 flat storage buildings that held about 250,000 bushels of corn each. I can still remember being in those Quonsets when they were completely full and thinking “that is a lot of corn”. I asked Dad recently about the dimensions. He said they were 240’ by 60’ with 12’ high sidewalls that peaked up. Those 3 buildings covered about an acre. I’m sure you’ve seen similar buildings or can visualize a building about that size. My quick math says that it would take more than 13,000 of those completely full at the end of next year to equal 3.3 billion bushels of corn. Or, more than 4,400 acres of corn piled 12 feet high at the side and peaked up from there. It's still hard for me to visualize that much corn.

So, how about this? Landus has about 165 million bushels of storage across our 50 or so locations, which is the 7th largest company in terms of storage in North America. I doubt that many of you have visited all of these locations. So, think about the one you frequent, or know best, and take that times 50 (more or less) to get to 165 million bushels of storage.

It would take 20 TIMES our entire storage capacity to hold 3.3 BILLION BUSHELS.

That is A LOT of corn.

I also know that back in the ’70s and '80s the country had large carry-outs like this. It’s the main reason many of those Quonsets were built. It’s why we had our 3 filled with corn for many years. The only difference between then and now is that those buildings were full of government corn then, and don’t store any grain today. Many grain elevators existed to store government grain. Sure demand was less back then but so were the prices. I don’t want to go back to the prices of those days.

But, with 3.3 billion bushels in storage a year from now, I am having a hard time visualizing a cash corn price much above $3 per bushel, if that. I know the prices being quoted for New Crop are nowhere near where any of us would like them. However, there is also some “weather premium” built-in, and if we have decent weather the balance of the crop year, that will erode quickly. The 4th of July is only 3 weeks away. Perhaps it disappears around then, depending on weather forecasts during pollination.

Regardless, I am more than a little concerned about where prices will be 5 months from now without some significant change to either the supply or the demand numbers in the WASDE. Sure, maybe China will step in and start buying a lot of corn and come to our rescue. The problem is they haven’t done that before. And if they do, it will most likely be because it’s a “good value” or “too cheap” to pass up. I can’t see them in a big hurry to buy given the recent Ending Stocks numbers.

3.323 Billion Bushels. That is a LOT of corn.

Agree? Disagree? Let me know: Tom.Guinan@LandusCooperative.

Now is a great time to finalize any Old Crop sales, and start making New Crop sales, if you haven’t already. Give your local Grain Marketing Advisor a call for more information.

Thanks, and have a great weekend.