Market and Yield Forecasts
Nov 17, 2020
Nearing the end of harvest across the U.S., corn and soybean markets continue to rally, with spring wheat holding steady to slightly mixed.
Soybean markets have seen a lot of strength in recent months with January futures rallying over $2.50 since the middle of August. The strength in the market can be attributed to the continued large purchases of U.S. soybeans by China. Delayed planting and production concerns in Brazil and Argentina, due to the overly dry conditions, have been another bullish factor in the soybean market.
Earlier in the growing season it looked like the U.S. was on pace for a record yield with the USDA’s August WASDE report estimating a national yield of 53.3 bu/ac. In the most recent yield estimate, the USDA has national soybean yield pegged at 50.7 bu/ac. The yield decrease in more recent estimates stems from a few factors including frost damage in the Midwest, the derecho in Iowa, and a dry finish on much of the soybean crop in the corn belt. The large Chinese export program, coupled with the deteriorating national yield estimates in the U.S., has brought the U.S. ending soybean stock estimate to a 7-year low of 190 million bushels and raises concerns of a supply shortage. There is talk among traders that they expect the USDA to increase exports in future estimates, which would make the U.S. balance sheet even tighter.
China has become the leading story in corn futures as well, with December futures rallying over a dollar since the beginning of August, due in large part to Chinese corn purchases and the early-August derecho that swept through Iowa to dampen corn yield estimates.
The USDA’s most recent yield estimate has the national corn yield at 175.8 bu/ac, down significantly from the August estimate of 181.8 bu/ac. This large production cut and increased exports have also brought the U.S. ending corn stock estimates to a 7-year low of 1.702 billion bushels if it holds true.
Fund buying has also been a very large market driver in both corn and soybeans. Funds are long 363K contracts of corn, the largest corn long since 2011. They are long another 278K contracts of soybeans, the largest long soybean position by funds dating back past 2010.
Spring wheat futures have seen some strength since early August as well, but not as much as in corn and soybeans. At one point the December contract was trading about 80 cents higher than the lows in early August, but the price has dropped since then. The reason for the recent retracement in price is more coronavirus concerns in Europe. We are looking at a near record world wheat carry out for the wheat crop, so it is hard to make a case for a big rally in wheat unless more production concerns arise or we see a significant increase in demand.