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ANALYSIS: US farmers face another challenging season

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Last year was a rough one for US farmers, with large storms, a US/China trade war and low crop prices. The Covid-19 virus has come along to disrupt the outlook for 2020.

 

Nevertheless American farmers are poised to sow their largest corn acreage since 2016 - 94m acres according to the US Department of Agriculture (USDA). That’s almost 5% higher than last season, and the USDA projects that corn use will also be around 5% higher year-on-year, at 14.74bn bushels.

 

The USDA also projects that soybean planted acres will rise to 85m acres in 2020, almost 9m more acres than planted in 2019. The USDA puts national average soybean yield at 49.8 bushels/acre, putting total estimated production at 4.2bn bushels, up 18% from 2019.

 

The weather could throw a spanner in the works

 

US farmers face an unusually uncertain sowing season.

 

Corn planting in the US tends to start vigorously in late April, and soybean planting right after that. But extremely wet soil conditions in the Corn Belt could hinder sowing. The balance of corn versus soybean acreage could change, depending on weather conditions, before the planting season gets into full swing.

 

So far 2020 looks like a bumper year for US corn production and a bigger, albeit not record, soybean crop.

 

The current outlook marginally favours soybeans

 

For corn, the supply growth is likely to exceed that of demand, says the USDA.

 

Corn prices are expected to fall in 2020 as inventories rise to a record high, despite increased US ethanol output, expected to rise to 25m bushels. Soybean total use, says the USDA, will increase by 6.3% year-on-year to 4.3bn bushels, a record high. Soybean trade exports are projected to increase 12% for 2020 to 2.05bn bushels from 1.8bn bushels in 2019.

 

Yet besides the uncertainties of the weather, there is the additional doubt concerning Chinese import demand in the context of that country’s economic slowdown due to the Covid-19 virus.

 

US ending stocks of corn in 2020 could rise to 2.6bn bushels, the highest since 1987, while soybean ending stocks are forecast to be 320m bushels (against 425m bushels last season).

 

If there is a sign of emerging tightness in supplies, then it is in soybeans rather than corn. Particularly if another big exporter, Argentina, exports fewer soybeans this season following an expected rise in tariffs.

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