ORLANDO, FLA. — A modest increase in planted acreage and potentially increased demand from China may boost U.S. corn prices, while soybean values likely will stay in the doldrums amid a long-term recovery from the trade war with China, INTL FCStone chief commodities economist Arlan Suderman said at the INTL FCStone Global Markets Outlook conference in Orlando on March 5.
Cash corn prices may average $4.85 a bu in 2019-20 (from the 2019 crop), Mr. Suderman said. That compares with $3.65 as the U.S. Department of Agriculture’s season average price projected at its recent Agricultural Outlook Forum, and with $3.60 per bu forecast by the U.S.D.A. for the current 2018-19 marketing year.
Planted area of 91.2 million acres, up modestly from 89.1 million acres in 2018, would result in a 2019 corn crop of 14,752 million bus, Mr. Suderman said, assuming an average yield of 176.5 bus per acre. If China purchases an additional 10 million tonnes of U.S. corn, 2019-20 ending stocks could fall to 1,217 million bus, equal to a 29-day supply and compared with U.S.D.A.’s projection of 1,650 million bus for next year and a forecast of 1,735 million bus for 2018-19.
“If I were an end user, this would concern me,” Mr. Suderman said. “The risk seems to be to the upside right now.”
Globally, corn stocks outside of China “leave very little room for error,” Mr. Suderman said. “We need to see corn acreage increase slightly just to keep up.”
The U.S.D.A. at its Outlook Forum projected 2019 corn plantings at 92 million acres, up 2.9 million acres from 2018, and corn production at 14,890 million bus based on a trend yield of 176 bus per acre. Mr. Suderman doesn’t expect 2019 corn plantings to increase as much as does the U.S.D.A. in part because he doesn’t see soybean plantings declining as much as the U.S.D.A. expects. Many farmers are sticking to their traditional crop rotation, he said, which will limit switching to corn despite uncertainty in the soybean market from the trade war.
The picture is less rosy for soybeans, Mr. Suderman said. The United States has been over producing without a trade war, and Brazil is producing soybeans much cheaper than the United States.
He suggested U.S. 2019 soybean plantings may fall only 3.5 million acres from 2018, to around 85.7 million acres, as the aforementioned crop rotation limits switching to corn, and as wet weather forces planting delays that favor soybeans over corn. The U.S.D.A. has projected 2019 soybean plantings at 85 million acres, down 4.2 million acres from 89.2 million acres planted in 2018.
There’s nothing bullish for soybeans, Mr. Suderman said, and China doesn’t need soybeans, suggesting that potential large purchases that may come as the result of a new trade deal likely will go into China’s reserve. Buying by China may pull 2018-19 U.S. soybean ending stocks down to 852 million bus from a record 910 million bus as the current U.S.D.A. forecast, but 2019-20 stocks may balloon to a record 1.2 billion bus, he said.
“Soybeans need to drastically cut acreage, and we don’t see that happening,” Mr. Suderman said.
“We are over-priced from a fundamental standpoint,” he said, although he didn’t offer a soybean price forecast. The U.S.D.A. projected the average price of soybeans in 2019-20 at $8.80 per bu, up 20c from the forecast 2018-19 average with ending stocks projected at 845 million bus.
He expects China will “throw money” at U.S. agriculture with large commodity purchases in an effort to get President Donald Trump to accept a trade deal without real structural changes in China.
“China appears willing to sacrifice its farm sector to get a trade deal that does not include structural issues,” he said.
“If the talks fall apart, commodities are a dog,” Mr. Suderman said. “If we get a trade deal, it’s good for agriculture from now to the 2020 election.”