2019 Commodity Market Outlook

April 05, 2019

2019 Commodity Market Outlook


Corn

Supply

USDA has estimated 2018 U.S. corn production at 14.4 billion bushels, 189 million bushels less than last year and the third highest on record. This year’s yield of 176.4 bushel per acre is the same as last year’s record high yield. Corn yields have achieved a remarkable run of success the past five years with yields exceeding all previous yields. U.S. harvested corn acreage is 81.7 million, one million acres less than 2017.

Demand

USDA has estimated 2018 U.S. corn use to be 14.9 billion bushels, the second highest on record. Domestic usage continued its steady increase since the 2012 drought. Feed for livestock is at the highest level since 2005 at 5.4 billion bushels. Ethanol usage, at 5.66 billion bushels, dropped 30 million bushel from last year. Exports are projected to be slightly higher than last year at 2.5 billion bushels. China historically imports very little U.S. corn. The most recent tariffs that China began have little effect on U.S. corn exports.

Carryover

USDA has estimated 2018 corn carryover to be 1.7 billion bushels, a 405 million bushel decrease from last year. Remarkably, we are projected to use 445 million bushels more than we produced with the third largest crop in history.

Looking Ahead

Demand remains robust. Positive factors in 2018 included the change to allow year round 15% ethanol in the U.S. gasoline supply. Ethanol usage had topped out at 10% of U.S. gasoline supply. Passage of a new trade agreement with Mexico and Canada would help to reduce uncertainty. We are hopeful trade negotiations with China will result in normal soybean exports which will indirectly support corn prices. Unlike soybeans, corn carryover is actually projected to decrease. Any concerns over South American and/or 2019 U.S. corn production should give the corn market optimism to rally out of the extended price range.

Soybeans

Supply

U.S.D.A. has estimated 2018 U.S. soybean production to be 4.5 billion bushels, topping last year’s previous record high by 132 million bushels. This year’s yield of 51.6 bushel per acre is second only to 2016 at 51.9 bushel per acre. The 2018 U.S. harvested acreage at 88.1 million acres is down 1.4 million acres from the record high acreage set in 2017. When adding in 2017 carryover, total supply surpassed 5 billion bushels for the first time ever.

Demand

USDA has estimated 2018 U.S. soybean usage to be 4.1 billion bushels, just 205 million bushels less than last year’s record high level. All eyes are on exports with the Chinese 25% tariff on U.S. soybeans. Exports are projected to be 1.9 billion bushels, down 254 million bushels from last year, the lowest since 2015. Crush (the process of production of meal for livestock), and oil is projected to be 2.1 billion bushels, 35 million bushels higher than last year and a record high level.

Carryover

Production will outpace usage by a whopping 452 million bushels. Carryover is projected to be a massive 910 million bushels. Carryover is projected to more than double the previous high carryover. Looking Ahead

Carryover of 910 million bushels of U.S. soybeans is overwhelming. Even if exports were to increase to pre-Chinese tariffs, carryover would still be near 700 million bushels. Events that could have serious positive impact on reducing carryover would be significant Chinese purchasing, and poor yields in the present South American crop, and then lower production from lower yields and acreage in the U.S. There needs to be a combination of these events to move soybean prices out of the recent trading range.





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