University of Kentucky College of Agriculture, Food and Environment

LEXINGTON (May 25, 2018) — The May World Agricultural Supply and Demand Estimates (WASDE) provides the initial supply and use projections for new-crop corn, soybeans, and wheat. At this point, the U.S. Department of Agriculture (USDA) relies on farmer surveys and trend yields to project production. The initial forecast does tell a story of how the grains and oilseed markets may have improved prices from last year.

A combination of reduced area and trend yields could reduce the size of the U.S. corn crop by 564 million bushels from last year. The corn market could also benefit from reduced carry-in from last year, which would also reduce the corn supply in 2018-19. USDA is projecting corn use at 14.6 billion bushels, which is slightly less than the use in 2017-18. The bottom-line for corn is that ending stocks could be trimmed by 500 million bushels, and that has the potential to support higher corn prices. USDA is projecting a U.S. farm price of $3.80 per bushel, which would be a $0.40/bushel increase from last year if realized.

USDA provides a slightly different story for soybeans. The 2018 soybean crop is projected to be 112 million bushels smaller than last year due to the assumption of reduced harvested area and trend yields. The smaller soybean crop would reduce the effect of a large carry-in of 530 million bushels.

A key assumption in soybeans is that exports will increase by 225 million bushels from 2017-18. The assumption of strong use is a driving factor in the projected reduction in stocks to 415 million bushels. If realized, the U.S. farm price for soybeans could be $10 per bushel.

USDA is also projecting higher wheat prices from 2017-18. The reduced carry-in from 2017 coupled with similar production in 2018 will continue to whittle away at wheat stocks. The key assumptions in wheat use are in feed use, which may be too high. USDA was cautious in projected exports with only a 15 million bushel increase from the current marketing year. If realized, wheat has the potential to draw stocks below a 50 percent stocks-to-use. The U.S. wheat farm price is projected at $5 per bushel.

These initial projections will be fine-tuned throughout the summer. As always, weather impacts on yield potential could provide pricing opportunities for the three crops and managers should be prepared to price crops on market rallies. The current story from USDA shows how a year with more normal yields could allow stocks to decline and provide opportunities for higher prices.

This article was written by Todd Davis, assistant Extension professor in the University of Kentucky College of Agriculture, Food and Environment. The article first appeared in the May 25, 2018 edition of the Center for Crop Diversification newsletter.