The grains continued to trade on the lower side of the ledger this past week as the market focus remained on the coronavirus outbreak.

Although the number of cases in China has started to decline, the number in neighboring countries is on the rise. South Korea, Italy and Iran are now the countries to watch as the number of cases has started to explode in those countries.

The recent spread of the virus has forced the U.S. to stand up and take note of the virus. The Centers for Disease Control and Prevention has said it is not a matter of if but when the virus hits the U.S. And as many have stated, it is not the number of people affected that is troublesome; it is the potential impact on the economy that has the marketplace the most concerned.

The last week of February was a good reminder of just how fickle the markets can be when faced with uncertainty. The news that the virus had spread into South Korea, Japan, Iran and Italy pushed the U.S. stock market and grains into a tailspin. By the time the dust settled, the Dow had dropped 9.6% from its Feb. 13 all-time high. The S&P 500 was off 8% and the Nasdaq was posting losses of 9.5%.

The grains were not much better, as wheat, corn and soybeans all sold off to post new lows for the year and all three of the wheat exchanges traded down to December 2019 lows (and a 50% retracement from recent high to recent low). Corn posted new contract lows in most contracts. Soybeans dropped to levels not seen since May 2019.

Ag Outlook Forum

The coronavirus is not the only news hitting the grain complex but is certainly the news that is sucking all of the oxygen out of the room. In other news, the U.S. Department of Agriculture held its Ag Outlook Forum on Feb. 20-21. This event is topped off with USDA releasing their economic view of what will happen in production agriculture for the next 10 years. We are not so worried about the next 10 years but very curious to what economists say will occur in 2020.

The Ag Outlook Forum estimates for wheat were slightly friendly. Wheat planted acreage is projected at 45 million acres (30.9 million winter wheat and 14.1 million other spring wheat and durum) versus 45.16 million last year. Harvested acres are forecast at 38.1 million versus 37.16 million last year. Yield is projected to drop 3.5 bushels to 48.2 bushels. That would put production at 1.84 billion bushels versus 1.92 billion bushels last year. Total demand is expected to decrease 26 million bushels to 2.139 billion bushels. The biggest change in demand is a 30 million bushel decrease in feed demand. But in the end, wheat ending stocks are expected to drop 163 million bushels to 777 million bushels, and the national average price is expected to increase 35 cents to $4.90.

It will be interesting to see if the planted acreage estimate can reach 45 million, as it is questionable that the Northern Plains will have the opportunity to get 14.1 million acres of spring wheat and durum planted. Last year, there was 12.66 million acres of other spring wheat planted in the U.S. and 1.34 million acres of durum, and with the poor harvest conditions and lack of fall field prep work completed, it seems unlikely that acreage would remain unchanged from last year.

The corn numbers do not look as attractive. The Ag Outlook Forum is estimating corn planted acreage at 94 million versus 89.7 million last year and 94.5 million from the Ag Outlook’s preliminary estimates last October. Yield is expected to recover 10.5 bushels and reach a new record of 178.5 bushels. That would result in an all-time high record corn production estimate of 15.46 billion bushels versus 13.69 billion bushels last year. Total supply of corn is expected to jump 1.42 billion bushels to 17.38 billion bushels. On the demand side, economists are expecting use to increase 670 million bushels to 14.74 billion bushels. The major adjustments came in a 275 million bushel increase in feed demand and a 375 million bushel increase in export demand. The net result was a potential increase of 745 million bushels in corn’s 2020 ending stocks estimate, now estimated at 2.64 billion bushels. The national average price for corn is expected to drop 25 cents to $3.60.

Just as it is hard to image wheat acres to remain steady, it is hard to believe corn acreage could see a 4.3 million acre increase. If corn acreage is expected to increase the change will have to come from the fringe states, not the Corn Belt, as most producers there do not change from a 50/50 or 60/40 crop rotation. With that in mind, the acreage increase will have to come in the northern tier states, the the mid Atlantic or the Eastern Seaboard. The issue with acres increasing in those regions is the fact that the northern tier states are the ones with corn still in the field and little to no fall prep work completed. The mid-Atlantic states are currently experiencing heavy rains with some regions reporting the wettest January-February in 40 years. That leaves the Eastern Seaboard as the only region that could increase acreage.

On the flip side, for as negative as the corn numbers were, soybeans numbers were just as friendly, or at least neutral. The Ag Outlook Forum is estimating 2020 soybean planted acreage at 85 million, up from 79.1 million in 2019 and slightly higher than their preliminary estimates from October. Yield was estimated at 49.8 bushels, slightly higher than 2019 yield of 47.4 bushels but lower than their preliminary estimate of 50.5 bushels. This puts production at 4.195 billion bushels, higher than 2019’s 3.56 billion bushels estimate or the preliminary estimate of 4.2 billion bushels. Total soybean supply was estimated at 4.635 billion bushels versus 4.482 billion bushels in 2019. On the demand side, the Ag Outlook Forum estimated total soybean demand at 4.314 billion bushels versus 4.058 billion bushels in 2019 and higher than their October preliminary estimate of 4.162 billion bushels. The major increases in demand came from a 25 million bushel increase in crush demand and from a 225 million bushel increase in exports (due to increased demand from China?). The end result, soybeans ending stocks are expected to drop to 320 million bushels, down 104 million bushels from 2019. The national average price is projected to be $8.80, up 5 cents from the previous year.

The soybean estimate was friendly in the fact that even though acreage is expected to jump an impressive 8.9 million acres, soybean stocks are expected to decline. This could result in more acres migrating to soybeans, not only because of price potential, but also because of expectations of the Northern Plains leaning toward late season crops due to poor field conditions.


Even with a few friendly reports, cattle have seen a major pull back. February’s Cattle on Feed report was friendly as the number of cattle in feedlots and the number marketed was in line with expectations. But after four months of increased placement, placements were 3% less than expected. USDA’s Cold Storage estimate was also friendly as the amount of beef in freezers was lower than the previous year and below the five-year average. But cattle still struggled because of economic concerns on the possibility of a sharp decrease in travel and availability of discretionary funds. If the coronavirus outbreak does not stabilize soon, it could result in a major reduction in beef consumption.

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