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Good Yields! Yes but a Warning | an interview with Gary Schnitkey



by Gary Schnitkey, University of Illinois
read farmdocDaily article

On a national basis, corn and soybean yields were near record-breaking levels in 2018, with exceptional yields in central Illinois and the eastern United States contributing heavily to those near-record U.S. yields. Other areas had below-trend yields. The county yields for corn and soybeans presented in this article illustrate these facts. Much higher U.S. yields are possible if all areas have exceptional yields. However, all areas including Illinois should not expect above-trend yields in every year.

Corn Yields

The 2018 corn yield for the United States was 176.4 bushels per acre, just .2 bushels below the record yield of 176.6 bushels per acre set in 2017 (all yields in this article are from QuickStats, a website maintained by the National Agricultural Statistical Service). From a national standpoint, corn yields were excellent in 2018.

Contributing to these high yields were counties having average yields above 220 bushels per acre. Several of these counties were in the Northwest U.S. and Nebraska where irrigation often is used in corn production (see Figure 1). In predominately non-irrigated counties, there were a concentration of counties in eastern Iowa and extending through central Illinois with over 220 bushels per acre average yields (see Figure 1). Three counties in this region, all in Illinois, had average yields over 240 bushels per acre: Douglas County (246.0 bushels per acre), Piatt (241.8), and Warren (241.7). Eleven counties – again, all in Illinois – had average yields between 230 and 240 bushels per acre: Macon (239.9), Sangamon (236.4), Logan (236.2), Tazewell (235.4), Effingham (235.2), Coles (234.2), Stark (234.0), Moultrie (233.9), Hancock (233.9), Christian (232.9), and Mercer (231.3). Eighteen counties had yields between 220 and 230 bushels per acre: 6 counties in Iowa and 12 in Illinois.



High yields are a measure of good growing conditions, but it does not take into consideration the inherent productivity of soil. Yield deviations from trend consider an area’s productivity. For each county, a 2018 trend yield was calculated using linear regression to fit a straight line through actual county yields from 1972 to 2017. The straight line then was extended to give the 2018 trend yield which represents the expected yield given approximately average growing conditions. A yield deviation then equals the actual yield minus the trend yield. A yield deviation of 20 bushels per acre means the actual 2018 yield is 20 bushels higher than the trend yield, an indicator of a very good yield. Conversely, a –20 yield deviation indicates that the county yield is 20 bushels below the trend yield, an indicator of poor growing conditions.

As would be expected, eastern Iowa and central Illinois had yields with positive yield deviations, with many counties having yield trends above 30 bushels per acre (see Figure 2). Note that yield deviations paint a broader area of excellent yields. That area includes southern Illinois, central and southern Indiana, western Ohio, western Kentucky, and parts of central Tennessee.



Other areas did not fare as well. Counties along the Iowa-Minnesota border had below-trend yields (see Figure 2). Other regions of poor yields in include Colorado, eastern Kansas and western Missouri, Texas, Arkansas and Louisiana, North Carolina, and New York.
Soybeans Yields Similar to corn, soybeans almost had a record-breaking yield. The average U.S. soybean yield for 2018 was 51.6 bushels per acre, .3 bushels below the record yield set in 2016 of 51.9 bushels per acre.

There were many areas of exceptional soybean yields (see Figure 3). Twenty-nine counties had average county yields over 70 bushels per acre. Three of these counties were in Nebraska: Gosper (75.2 bushels per acre), Dawson (73.2), and Buffalo (70.6). The remaining 26 counties were in Illinois. Three Illinois counties had average county yields over 80 bushels per acre: Sangamon County (82.3 bushels per acre), Morgan (81.6), and Douglas (80).



Yield deviations suggest that central and southern Illinois had exceptional growing conditions in 2018 (see Figure 4). Excellent growing conditions continued into Indiana, Ohio, Kentucky, and Tennessee. Other areas did not have as productive of a year. Yields were below trend along the Iowa-Minnesota board, North and South Dakota, Nebraska, Wisconsin, Michigan, Pennsylvania, and in North and South Dakota.



Commentary The U.S. had near-record yields for corn and soybeans in 2018. Above-trend yields in central and southern Illinois, central and southern Indiana, western Ohio, Kentucky, and Tennessee where large contributors to the near-record U.S. yields.

The examination of county yields suggests two warnings. Illinois farmers should note that many several areas in the country had below-trend yields in 2018. Therefore, the 2018 experience indicates that below-trend yields are still possible. Illinois farmers should not plan on having above-trend yields in every year. It is entirely possible that the area of below-trend yields centered along the Iowa-Minnesota border in 2018 could occur in central Illinois. At the same time, Iowa and Minnesota could have above-trend yields. If that reversal occurs in 2019, there would be large, negative incomes on many Illinois farms.

Somewhat counter to the first warning, the second warning is for the possibility of much larger national corn and soybean supplies. It is possible that all areas of the U.S. have above-trend yields. That is, the western Corn Belt could have had above-trend yields at the same time the eastern Corn Belt has above-trend yields. If this occurs, national yields would be record-breaking, resulting in falling corn and soybean prices, leading to very low farm incomes.

Farmers Unlikely to Make Big Acreage Switch to Corn

The scuttlebutt in the trade, even in the numbers released by USDA at its February Agricultural Outlook Forum, is that the economics will push farmers to plant a lot more corn acres this year.

Ag Economist Gary Schnitkey has updated budgets for corn and soybeans across the state. He knows USDA increased its expectation for corn acres around the nation by about 3 million acres but says he does not expect a big shift to corn in Illinois, “What we find is that corn is projected to be more profitable than soybeans. This is the first year in a while that has happened. However, our budgets do not suggest shifting to more corn production. Particularly corn-after-corn is less profitable than soybeans. So, it is status quo for the central Illinois area with a 50/50 corn/soybean rotation being more profitable for 2019.”

This holds for northern and central Illinois. Southern Illinois still has a regionalized economic bias to plant soybeans. Soybeans make more money there says Schnitkey, “However, the big thing right now is the upcoming USDA Prospective Plantings report and whether we will see shifts from soybean to corn which some people are expecting. These budgets would say in the heart of the corn belt, or in the corn belt in general, that you won’t see shifts from soybeans to corn. So, you have to see those shifts from someplace else and there are limited opportunities there.”

USDA in its February Outlook meeting projected U.S. farmers would plant about three percent more corn acres this season than last and almost five percent fewer soybean acres. The agency will release an official estimate of acreage March 29th.

Feb 23 | WILLAg Newsletter

Changes are coming!

The agricultural sector is caught up in a storm of change. Political and economic forces have been squeezing trade on the global front and U.S. farmers have been leaning into the winds. We take up a few of these topics in this edition of the WILLAg Newsletter.
  • Trade with China
  • Profile of USTR Lighthizer
  • USDA Ag Outlook Forum
  • Corn Acreage in 2019
  • Expected Corn vs Soybean Returns
  • 2018 Ethanol Plant Losses
We’ll also explore these topics, marketing prospects, the price of farmland, and the weather during our March 5 All Day Ag Outlook. Hopefully, you can join us at the Beef House in Covington, Indiana. The cost is just $30 and includes Beef House coffee and rolls in the morning and Beef House lunch at the noon hour.

Tickets are available online or by calling 800–898–1065.

Hope to See You There!
Todd E. Gleason, Farm Broadcaster
University of Illinois Extension | WILLAg.org





Trade with China

Friday the Chinese trade delegation gathered in the Oval Office with President Trump. A letter from President Xi was read out loud. It urged a continued push toward a final trade deal. The only firm detail to come out of the week’s worth of talks in Washington was a commitment to purchase 10mmt of soybeans. USDA issued an official release on the announcement. It did not include a timeline for the purchases. CNBC reported the Chinese had offered to guarantee purchases of $1.2 trillion dollars of U.S. goods. Again, there was no timeline issued and this point has not been confirmed by any other outlet, the White House, or the Chinese.

During the week the trade discussions in Washington, D.C. pointed to five MOU’s. These Memorandums of Understanding included one on agriculture and were how U.S. Trade Representative Robert Lighthizer had decided to break down the issues in order to tackle them; agriculture, non-tariff barriers, services, technology transfer & intellectual property.

President Trump during the Oval Office meeting Friday pushed aside the MOU’s. He interrupted Trade Representative Lighthizer in front of the Chinese. Lighthizer was trying to explain how the MOUs would build the foundation of a trade deal. Mr. Trump stopped him and said, “I disagree. I think that a memorandum of understanding is not a contract to the extent that we want.” Lighthizer agreed that the term MOU would not be used again.

The important point in this exchange is likely not the MOU discussion. The President interrupted and corrected his lead trade negotiator in front of the Chinese delegation. Clearly, if a trade deal is to be struck it can only be done one-on-one between Presidents Trump and Xi. They may meet next month at Mar-A-Lago.

Mr. Trump has long focused on closing the trade gap with China. The other issues have not been of very much importance to him although he does mention China stealing and intellectual property rights. A trade deal with China is one of the President’s campaign promises. The dazzling $1.2 trillion number CNBC reported might be very enticing to a man who has had a habit of fulfilling his campaign promises.

If it is completed in this fashion, without enforcement mechanisms or real intellectual property rights protections, then as President Trump has said recently Democrats won’t go along. Republicans are likely to stay mum as the deal sets idle in Congress and simply becomes a presidential election year rallying cry. Presidents negotiate trade deals. Congress approves them.



Profile of USTR Lighthizer

NPR profiled Trade Representative Lighthizer this week. Please take six minutes to listen. It’ll be worth your while to know a whole lot more about the man leading the trade negotiations with China.




USDA Ag Outlook Forum

This week USDA put on its 95th Annual Agricultural Outlook Forum. It provides some initial numbers the trade uses to project the 2019 growing season into the markets until official USDA reports are issued. The first supply and demand report for the 2019/20 growing season will be issued in May. The March 29 Prospective Plantings report will provide survey results of what farmers think their acreage mix will look like this year. Here you will find some of the powerpoint slides U.S.D.A. Chief Economist Robert Johansson presented in the opening session and the full supply and demand tables presented Friday morning.


You may watch the full opening session of the 2019 USDA Agricultural Outlook Forum. It took place in Washington, D.C. February 21 and 22.





























Corn Acreage in 2019

read farmdocDaily article

The number of acres of corn planted this spring will be a key factor in determining where the price of corn goes. University of Illinois Agricultural Economist Todd Hubbs took up the issue in this week’s farmdocDaily article.

He starts with a historical graph. It shows the principal crop acres in the United States and how those have changed since 1997. Both corn and soybean acreage have increased. Combined they’re up about 10 percent over the past two decades.



Illinois’ Todd Hubbs uses that history to help put the number or corn and soybeans acres into perspective, “When we look at the harvest month corn to soybean futures price ratio this year it has been about 2.37. There is a definite signal in this graph from about 2006 to 2018 that if you are above 2.4 in that ratio, there will be less corn acreage. If you are below 2.3 there will be more corn acreage. We are, today, sitting right in between those. We’ve seen problems with field work in large parts of the corn belt. We’ve seen fertilizer and other input costs go up on corn. So, the idea that we are going to see a massive increase in corn acreage could happen, but under the current price structure we might not see the kind of corn acreage we think we are going to see.”



Hubbs says he used the 2019–20 futures prices to forward calculate a seasons average cash price for new crop corn. His calculation points to $3.81 per bushel. He then figured a stocks to use ratio that would fit that number, “I think an 11% stocks to use ratio in 2019–2020 would give us $3.81. If consumption is constant at 14.8 billion bushels from this marketing year to the next, that would put corn acreage around 91.7 million at a national trend line yield of 174.6 bushels to the acre.”

Finally, Hubbs says there isn’t a lot of weather premium priced into new crop corn futures. He also says there isn’t much of premium built in for a possible trade deal with China. Hubbs thinks that may be just as bullish for corn as it is for soybeans. Right now he thinks the 2.37 soybean/corn ratio feels high if the expectation is for a substantial increase in corn acreage.



Expected Corn versus Soybean Returns in 2019



by Gary Schnitkey, University of Illinois
see full farmdocDaily article and video

Two factors have changed between the planning periods in 2018 and 2019. First, expected soybeans prices are lower in 2019 as compared to 2018. A reasonable way of forming expectations of cash prices at harvest is to use current bid prices for fall delivery of grain. In 2018, fall delivery prices for soybeans in the month of February averaged about $9.80 in East-Central Illinois. In 2019, fall delivery prices are roughly $.75 per bushel less at $9.05 (see Table 1). At the same time, fall delivery prices for corn are roughly the same at $3.70 per bushel. An $.75 decline in soybean price reduces expected soybean returns by $45 per acre given a soybean yield of 60 bushels per acre ($45 = .75 lower price x 60 bushels yield).



Second, costs have increased, with a primary contributor being increases in nitrogen fertilizer prices. Throughout much of 2018, anhydrous ammonia prices were in the low $500 per ton range (see Table 2). So far in 2019, anhydrous ammonia prices have averaged $607 per ton in January and $613 in February (see Table 2). Fall applications of nitrogen were limited in 2018 due to wet soil conditions, leading many farmers to have to price nitrogen in 2019. These farmers likely will pay around $100 per ton more for anhydrous ammonia in 2019 as compared to 2018. If 220 pounds of anhydrous ammonia are applied per acre, leading to an application of 180 pounds of elemental N (180 = 220 pounds x .82 N analysis of anhydrous ammonia), nitrogen fertilizer costs would increase in 2019 over 2018 levels by $11 per acre ($100 price increase per ton x 220 pounds of anhydrous ammonia per acre / 2000 pounds per ton).



The decrease in soybean price increases the relative profitability of corn. The increase in nitrogen fertilizer price decreases the relative profitability of corn, partially offsetting the impacts if the soybean price increase.

2019 Corn and Soybean Budgets
Table 3 shows 2019 corn and soybean budgets for high-productivity farmland in central Illinois (see farmdoc for 2019 Crop Budgets). These budgets incorporate price and cost changes between 2018 and 2019. Two notes about these budgets:
  • Yields are 213 bushels per acre for corn-after-corn and 63 bushels per acre for soybeans-after-corn. These are trend yields. In recent years, yields in Illinois have been above trend. Corn yields averaged 20 bushels above trend from 2014 to 2018 (farmdoc daily, January 3, 2018) while soybean yields have averaged 6.5 bushels above trend (farmdoc daily, December 11, 2018).
  • Prices used in budgets are $3.60 per bushel for corn and $8.50 per bushel for soybeans. The corn price is near fall delivery bids while the budgeted soybean price is about $.55 per bushel below the fall delivery bid. The lower budgeted soybean price reflects a general pessimism about soybean prices resulting from expected large supplies relative to demand (see farmdoc daily, January 28, 2019). This lower soybean price will decrease soybean profitability relative to corn, suggesting more of a shift to corn than a higher soybean price.


Operator and land returns are $188 per acre for corn and $180 per acre for soybeans, suggesting that corn will be more profitable than soybeans. However, this difference in profitability does not suggest a large shift in acres to corn. Most farms in central Illinois have a corn-soybean rotation, necessitating a move to corn-after-corn to grow more corn. Corn-after-corn returns are projected at $137 per acre, which are less than the $180 per acre soybean-after-corn return. These lower corn-after-corn returns suggest maintaining a corn-soybean rotation.

Other Budget Values Operator and land returns shown in Table 3 were recalculated for two different scenarios. First, a $9.00 soybean price was used to calculate soybean returns. The $9.00 price is close to fall bids. Given that corn prices do not change, operator and land returns for corn remain the same as those shown in Table 3:
  • corn-after-soybeans: $188 per acre, and
  • corn-after-corn: $137 per acre,
while soybean returns increase to:
  • soybeans-after-corn: $211 per acre, and
  • soybeans-after-two-years-corn: $229 per acre.
As would be expected, this price scenario increases soybean profitability relative to corn. Current forward bids do not suggest a shift to corn from a profitability standpoint.

The second scenario maintains the corn and soybean prices at $3.60 and $8.50, respectively, but increases corn yields by 20 bushels per acre and soybean yields by 6 bushels per acre. This scenario reflects a situation where budgets are more optimistic than trend yields due to high yields in recent years. In this case, operator and land returns are:
  • corn-after-soybeans (233 bushels per acre): $260 per acre
  • corn-after-corn (223 bushels per acre): $209 per acre
  • soybeans-after-corn (69 bushels per acre): $231 per acre
  • soybeans-after-two-years-corn (71 bushels per acre):$248 per acre
Higher yields increase returns and also increase the relative profitability of corn. However, corn-after-scorn is less profitable than soybeans-after-corn. These projections do not suggest that growing more corn would be more profitable than maintaining soybean acres given that both crops have above trend yields at 2013–2018 levels.

Summary and Conclusions
Current fall delivery prices do not suggest that switching to more corn away from soybeans will result in higher profitability on high-productivity farmland in central Illinois. Due to high relatively corn yields, central Illinois is one of the most profitable areas to grow corn relative to soybeans, If central Illinois budgets do not suggest a switch to corn, budgets in less productive areas likely will not suggest a shift from soybeans to corn.



2018 Ethanol Plant Losses
see full farmdocDaily article

University of Illinois Agricultural Economist and noted ethanol industry specialist Scott Irwin wrote an article detailing the financial losses the industry experienced last year. Use the link above to read the full article. Here’s the paragraph Irwin penned on the potential implications for ethanol going forward.

“The ethanol industry in 2018 experienced its first losing year since 2012, thereby ending a run of five consecutive years of positive returns. The estimated loss for a representative Iowa ethanol plant in 2018 was -$2.2 million. While large, the 2018 loss was still far less than the -$6.7 million loss in 2012. The evidence points to overproduction as the driving force behind the low prices and financial losses experienced by ethanol producers during 2018. The fortunes of the U.S. ethanol industry are unlikely to improve until production and use are better balanced. This will require shuttering some production capacity, additional demand, or some combination of the two. The most optimistic scenario is additional demand for U.S. ethanol exports as part of a trade deal with China.” - Scott Irwin, University of Illinois

President Trump's Oval Office Remarks on Trade with China

Trump | Oval Office Remarks February 19, 2019

Q How confident are you that it will be finished by March 1? Or are you considering extending that deadline?

THE PRESIDENT: Well, they are very complex talks. They’re going very well. We’re asking for everything that anybody has ever even suggested. These are not just, you know, “let’s sell corn or let’s do this.” It’s going to be selling corn but a lot of it – a lot more than anyone thought possible. And I think the talks are going very well – with China, you’re referring to?

Q Yes.

THE PRESIDENT: And the talks are going very well.

Our group just came back and now they’re coming here. I can’t tell you exactly about timing, but the date is not a magical date. A lot of things can happen.

The real question will be: Will we raise the tariffs? Because they automatically kick in to 25 percent as of – on $200 billion worth of goods that they send. So I know that China would like not for that to happen. So I think they’re trying to move fast so that doesn’t happen. But it’s – we’ll see what happens.

I can only say that the talks with China on trade have gone very, very well. In the meantime, our economy is very strong. We’re doing well.

I don’t know if you noticed, but deficits seem to be coming down. And last month it was reported, and everybody was surprised, but I wasn’t surprised. We’re taking in a lot of money coming into our Treasury from tariffs and various things, including the steel dumping. And our steel companies are doing really well. Aluminum companies also. So we’re very happy about that.

I think that it’s – they’ll be coming very shortly. They’re going to have very detailed discussions on subjects that have never really been even discussed by people that sat in this chair and they should have been. Very important subjects. And I think we’re doing very well. Okay?

Corn Acreage in 2019

read farmdocDaily article

The number of acres of corn planted this spring will be a key factor in determining where the price of corn goes. University of Illinois Agricultural Economist Todd Hubbs took up the issue in this week’s farmdocDaily article.




He starts with a historical graph. It shows the principal crop acres in the United States and how those have changed since 1997. Both corn and soybean acreage have increased. Combined they’re up about 10 percent over the past two decades.



Illinois’ Todd Hubbs uses that history to help put the number or corn and soybeans acres into perspective, “When we look at the harvest month corn to soybean futures price ratio this year it has been about 2.37. There is a definite signal in this graph from about 2006 to 2018 that if you are above 2.4 in that ratio, there will be less corn acreage. If you are below 2.3 there will be more corn acreage. We are today sitting right in between those. We’ve seen problems with fieldwork in large parts of the corn belt. We’ve seen fertilizer and other input costs go up on corn. So, the idea that we are going to see a massive increase in corn acreage could happen, but under the current price structure we might not see the kind of corn acreage we think we are going to see.”



Hubbs says he used the 2019–20 futures prices to forward calculate a seasons average cash price for new crop corn. His calculation points to $3.81 per bushel. He then figured a stocks-to-use ratio that would fit that number, “I think an 11% stocks to use ratio in 2019–2020 would give us $3.81. If consumption is constant at 14.8 billion bushels from this marketing year to the next, that would put corn acreage around 91.7 million at a national trend line yield of 174.6 bushels to the acre.”

Finally, Hubbs says there isn’t a lot of weather premium priced into new crop corn futures. He also says there isn’t much of premium built in for a possible trade deal with China. Hubbs thinks that may be just as bullish for corn as it is for soybeans. Right now he thinks the 2.37 soybean/corn ratio feels high if the expectation is for a substantial increase in corn acreage.

USDA Reports Provide Little Support for Corn and Soybeans

by Todd Hubbs, University of Illinois

The USDA finally released a set of highly anticipated reports on Friday. The results projected lower ending stocks for corn and soybeans during this marketing year. Despite lower ending stock forecasts, the results disappointed and produced a somewhat bearish outlook. The following discussion recaps developments in corn and soybean crop fundamentals coming out of the reports and price implications moving forward.



Corn ending stock projections for the 2018–19 marketing year came in at 1.735 billion bushels, down 46 million bushels from the December forecast. Reduced corn production in 2018 drove ending stocks lower despite a 165 million bushel reduction in total use during the marketing year. Corn production is down 1.4 percent from the November forecast at 14.4 billion bushels. The harvested acreage estimate of 81.7 million acres is down from the November forecast of 81.8 million acres. Average corn yield of 176.4 bushels per acre is 2.5 bushels lower than the November forecast. December 1 corn stocks came in at 11.952 billion bushels. Total disappearance came in near 4.62 billion bushels during the first quarter of the marketing year, up from last year’s first quarter use by approximately 280 million bushels. Despite the lower domestic supply numbers and stronger first quarter use, lower consumption forecasts in key categories provide little support for corn prices.

The WASDE report forecast for U.S. corn during 2018–19 lowered corn use projections for feed and residual use, ethanol crush, and other food and industrial uses. At 5.375 billion bushels, the projection for corn feed use and residual moved lower by 125 million bushels. The ethanol use forecast decreased by 25 million bushels to 5.575 billion bushels. The lower ethanol use reflected the slowing ethanol production levels over the last month. Food, seed, and industrial use other than ethanol saw the consumption forecast lowered 15 million bushels on reduced corn use for high fructose corn syrup, glucose, and dextrose. Corn export forecasts maintained the 2.45 billion bushels forecast in December. The potential for increased corn usage seems increasingly dependent on continued economic growth and the resolution of the current trade impasse.

World ending stocks for corn increased by almost 40 million bushels from December forecasts. The increase focused on stronger production in key growing areas. In particular, Argentine corn production forecasts totaled 1.81 billion bushels, up from last year’s 1.26 billion bushels. Brazil’s corn production forecast stayed at 3.72 billion bushels this year. In total, Brazil and Argentina production forecasts exceed 2017–18 production estimates by 1.04 billion bushels. Projections of corn exports from Argentina and Brazil sit at an additional 492 million bushels each above last marketing year. Given the increase in South American production, the evolution of crop conditions in the region bears monitoring as we move into 2019.

The forecast for soybean ending stocks fell to 910 million bushels. Despite the 45 million bushel reduction to ending stocks, the current projection remains record high. Soybean production came in 56 million bushels lower than the November forecast at 4.54 billion. The harvested acreage estimate of 88.1 million acres is down from the November forecast of 88.3 million acres. Average soybean yield of 51.6 bushels per acre is 0.5 bushels lower than the November forecast. While the expected reduction in soybean production materialized, consumption continues to exhibit strong crush levels and weak exports this marketing year.

The WASDE report increased the soybean crush forecast by 10 million bushels to 2.09 billion bushels. The change in the crush projection reflects strong crush numbers through January. Soybean exports saw the forecast lowered by 25 million bushels to 1.875 billion bushels. Considerable uncertainty remains in export potential in 2019 as the sporadic nature of trade talks with China unfold. Total use fell by 15 million bushels on weaker export projections to 4.092 billion bushels. The consumption for this marketing year holds the potential for deterioration if the trade war escalates and increased competition out of South America materializes.

World production forecasts for the marketing year decreased by 301million bushels to 13.26 billion bushels on the smaller U.S. and Brazilian crops. The Brazilian soybean production forecast decreased by 183.72 million bushels over the December forecast to 4.3 billion bushels. Reports out of Brazil indicate this number may fall further before the final crop estimate is complete. The Argentinian soybean production forecast fell slightly to 2.02 billion bushels on reduced acreage. The Brazilian soybean export forecast dropped by 55 million bushels reflecting the decreased crop production levels. Forecasts for Brazil and Argentina soybean exports sit at 3.15 billion bushels over the marketing year, up from last marketing year’s estimate of 2.88 billion bushels.

While the ending stock projections for both crops fell, the USDA maintained price projections for the marketing year at the December mid-point ranges for corn and soybeans at $3.60 and $8.60 respectively. Barring a resolution to the trade issues with China or a significant deterioration in the South American crop, soybean prices are untenable at current levels. Corn prices appear set to remain flat and range bound until the March Prospective Planting reports provide an initial indication of crop acreage in 2019.

January Crop Report Yield Expectations

The January USDA reports have been delayed until further notice because of the government shutdown. It is expected once these numbers are released the changes in the national yields for corn and soybeans could be positive for price.

The last time USDA updated corn and soybean yields was in the month of November. Both crops saw a drop in predicted yield for the 2018 harvest. This drop has been since complicated by harvest problems. Todd Hubbs from the University of Illinois says history can sometimes be a guide to how the January Crop Production report might change. More often than not when the yields from October to November go down, the U of I commodities specialist says they drop again in January, “And what you see is when you see a yield change from November to October that is negative, we tend to see a similar change from January to November. Now it doesn’t always hold, but if that were to materialize we probably see a corn number around 177.2 bushels to the acre. I think it might be a little bit higher than that, but even if it is if we lose half to one bushel out of the current projection of 178.9, then that is really supportive for corn prices moving forward.”

Hubbs says a similar pattern holds for soybean yields. On average he says that’s been about a quarter of a bushel per acre… a little better than that actually… and if it came to fruition this year it would put the 2018 soybean yield at 51.8 bushels to the acre. That would clearly be supportive to price says Hubbs, even though the trade issues with China are continuing, “We could also see some acreage come out of both corn and soybeans as harvest was really tough in some places. Particularly out in Kansas and the southern plains. This has more implications for winter wheat seedings than it does for anything else. Right now, by my projections, I think winter wheat acreage will be down by one-point-five percent from last year’s 32.5 million acres. This may have implications for both corn and soybean acreage in the southern plains as we move into 2019 and think about what kind of acreage we will have.”

The implication being a potential increase in corn or soybean acreage in that area. USDA says it will announce the date for the release of the January reports once the government shutdown has ended.

January Crop Report Yield Expectations

The January USDA reports have been delayed until further notice because of the government shutdown. It is expected once these numbers are released the changes in the national yields for corn and soybeans could be positive for price.

The last time USDA updated corn and soybean yields was in the month of November. Both crops saw a drop in predicted yield for the 2018 harvest. This drop has been since complicated by harvest problems. Todd Hubbs from the University of Illinois says history can sometimes be a guide to how the January Crop Production report might change. More often than not when the yields from October to November go down, the U of I commodities specialist says they drop again in January, “And what you see is when you see a yield change from November to October that is negative, we tend to see similar change from January to November. Now it doesn’t always hold, but if that were to materialize we probably see a corn number around 177.2 bushels to the acre. I think it might be a little bit higher than that, but even if it is if we lose half to one bushel out of the current projection of 178.9, then that is really supportive for corn prices moving forward.”

Hubbs says a similar pattern holds for soybean yields. On-average he says that’s been about a quarter of a bushel per acre… a little better than that actually… and if it came to fruition this year it would put the 2018 soybean yield at 51.8 bushels to the acre. That would clearly be supportive to price says Hubbs even though the trade issues with China are continuing, “We could also see some acreage come out of both corn and soybeans as harvest was really tough in some places. Particularly out in Kansas and the southern plains. This has more implications for winter wheat seedings than it does for anything else. Right now, by my projections I think winter wheat acreage will be down by one-point-five percent from last year’s 32.5 million acres. This may have implications for both corn and soybean acreage in the southern plains as we move into 2019 and think about what kind of acreage we will have.”

The implication being a potential increase in corn or soybean acreage in that area. USDA says it will announce the date for the release of the January reports once the government shutdown has ended.

Corn Exports are On Pace

Each Friday over the past three weeks December corn futures closed lower. These lower weekly thresholds have come despite a very good export pace.

USDA projects this marketing year U.S. corn exports will top two-point-four-billion bushels. So far that doesn’t look too bad says University of Illinois Agricultural Economist Todd Hubbs, “We are definitely on pace. We’ll above last year’s pace, but everybody needs to remember we got off to a sluggish start last year and it really picked up in the second-half of the marketing year. We’ve seen a little bit of weakness recently, but we are still within the 2.45 billion bushels in my opinion.”

Hubbs is okay with USDA’s corn-used-to-produce ethanol figure, too. Although he says that’ll depend on ethanol exports as plant margins are really tight. He’s hopeful the corn-used-for-feed number will look better in January. That’ll depend a lot on the December Grain Stocks report. Still he says, “Right now, from the November projections, we are on track. There is a lot of uncertainty left in that. But when we look at the corn prices over the last few weeks, it is definitely related to the soybean prices and the bearishness in the (crude) oil market. I think both of those things are holding down corn prices.”

Not that if those two items were solved corn would rally substantially. It would come up, but still be capped by the available supply and some thought that USDA’s export target is a bit robust. Todd Hubbs thinks of it this way. The market has a done a good job of front loading U.S. corn exports and it is very unlikely the second half of the 2018/19 marketing year will be a repeat of last season’s stellar pace.

Corn and Soybean Acreage Prospects for 2019


As US farmers finish the fall harvest, considerable speculation will occur over the next few months about the acreage decisions they’ll make for 2019. Todd Gleason discusses how current market conditions support an acreage increase next year for corn and a reduction for soybeans with University of Illinois agricultural economist Todd Hubbs.

farmdocDaily article
by Todd Hubbs, University of Illinois

Prospects for 2019 crop acreage levels begin with expectations about planted acreage for principal crops. In 2018, acreage planted in principal field crops expanded to 322 million acres, up 2.9 million acres from the previous year. A large share of increased acreage came from an expansion of spring wheat acreage by 2.18 million acres, cotton acreage by 1.4 million acres, and hay acreage by 1.28 million acres. Corn and soybean acreage decreased by 1.03 and .997 million acres respectively. Illinois increased planted acreage by 188,000 acres like most of the primary Corn Belt states. A significant exception came in South Dakota which lowered acreage by 343,000 acres, driven mostly by lower corn acreage. In conjunction with the increase in principal crop planted acreage, prevent plant acreage is small thus far in 2018. The Farm Service Agency reports 1.88 million acres of prevented plantings as of October 1, down from 2.59 and 3.4 million acres in 2016 and 2017 respectively.

As we move into 2019, the prospects of large adjustments to crop acreage increasingly focuses on soybean acreage. Acreage adjustments in many major growing areas may be in the form of crop adjustments instead of acreage losses. The current price environment across principal crops points to constant or modest changes in total planted acreage in 2019 and holds the potential for less overall soybean and corn acres.

Since the inception of the Renewable Fuels Standard and growth in Chinese soybean imports, a noticeable shift in principal crop acreage created increases in corn and soybean acreage at the expense of wheat and small grains. Corn and soybean acreage increased from 158.3 million acres in 2006 to 178.3 in 2018 with a peak acreage of 180.3 million in 2017. Over the same period, wheat acreage declined from 57.3 million acres to 47.8 million projected in 2018. The low for wheat acres came in 2017 at 46.02 million acres. Similarly, small grain acres fell from 18 million acres to 14.88 million with a low of 14.5 in 2017. These acreage adjustments stand out when analyzing the data from the three western Corn Belt states of North Dakota, South Dakota, and Kansas.

In 2006, the states mentioned above planted 20.54 million acres of corn and soybeans. Since that year, corn and soybean acreage grew by over eleven million acres with a peak year of 32.52 million acres in 2017. In 2018, 31.15 million acres of corn and soybeans were planted in those states. Conversely, wheat acres contracted dramatically in those states continuing a long run trend. In 2006, the three states planted 21.9 million acres of wheat. Since that year, wheat acreage fell by over four million acres with a low year of 16.2 million acres in 2017. In 2018, 17.3 million wheat acres were planted in those states.

Narrowing profitability margins appear to be shifting away from the expansion of corn and soybean acreage and back to wheat, small grains, and cotton in many areas. Current projections by industry analysts place 2019 corn acreage in a range from 90 to 93.7 million acres. Soybean acreage projections come in between 82.3 and 87.5 million acres. In essence, if the current margins continue, we may be at the beginning stages of unwinding the acreage shifts seen over the last decade. In 2018, corn and soybean acreage in total reversed a three-year trend of increased planted acres. While soybean and corn acreage decreased in 2018, many crops saw planted acreage increases. In particular, spring wheat, cotton, barley, rye, oats, and hay recorded increases. In the main corn producing states during 2018, Missouri, Michigan, Nebraska, and Ohio increased corn acreage over 2017 planting decisions. None of those states increased corn acreage by more than 100,000 acres. Decreases in soybean planted acreage came from North Dakota, Kansas, Arkansas, Minnesota, and Missouri. As we move into 2019, corn and soybean acreage shifts depend on the evolution of corn and soybean prices between now and planting.

Expectations about corn and soybean acreage will continue to evolve. Preliminary surveys of farmer’s planting intentions indicate an intention to decrease soybean acreage and increase corn acreage. Using current market prices, projections for corn and soybean acreage place 2019 corn acreage at 91.1 million acres and soybean acreage at 85.7 million acres. Data availability on acreage begins with the USDA’s Winter Wheat Seedings report in January to be followed by the March Prospective Plantings report.

Reviewing Prices and Market Facilitation Payments

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As the trade conflict with China continues, prices for many agricultural commodities remain relatively low. Illinois corn and soybean prices dipped to new lows in September, coinciding with the latest rounds of tariffs.



The difference between selling an entire crop at spring forward bid prices compared to the September average cash prices makes a substantial difference in income on an average central Illinois grain farm.



University of Illinois Agricultural Economist Gary Schnitkey reviews how this plays out on a 1700 acre corn and soybean farm in Illinois this year, and what the prospects look like for next year.

Trump Admin Still Has Some Biofuels Work to Do

Last Tuesday President Donald Trump made a campaign trip to Council Bluffs, Iowa. There he told a very excited crowd his administration would be backing corn farmers and ethanol.

The President leaned into the mic and gave corn farmers a little insider news they’ve been clamoring to hear since U.S. EPA pronounced gasoline blended with 15 percent ethanol would be ok to use in all cars made since 2001, “We are a little bit early. I shouldn’t say it now, but we are going with E15 year-round.”

Mr. Trump is a little early. Today E15 can be used about 9 months out of the year in much of the nation. During those other three months, the summer months, it has been prohibited. U.S. EPA will need to write some rules about how to make the year-round use happen. Those will need to be approved, and clearly the oil industry will mount court challenges.

If all goes well more corn will be used to make ethanol for E15, but it won’t make a difference in the balance sheets for corn says University of Illinois Agricultural Economist Scott Irwin, “Not for this year and I am confident not for next year.”

So the E15 announcement, while a long run win for corn ethanol, rings a little hollow. The Administration’s other big farm country biofuels problem is EPA’s use of the Small Refinery Exemptions or SRE. The good news here, says Illinois’ Irwin, is that ethanol usage has been holding strong despite EPA letting some refineries out of the mandate to produce gasoline blended with a home grown fuel like ethanol made from corn.

However, there is a problem with oil pressed from soybeans to make biodiesel says Irwin, “And the total amount of biodiesel, because of the Small Refinery Exemptions, has probably gone down at least 10 percent. So, there has been real demand destruction from the Small Refinery Exemptions, but it is in biodiesel and not ethanol.”

US EPA has through November to announce its final decisions related to the volume of biofuels it will require in the nation’s gasoline supply in 2019. It may or may not include some guidance on how it expects to use the Small Refinery Exemptions going forward. So far, it has said it will make no comment on that point.

2019 Illinois Crop Budgets are Dismal

The numbers look bad for Illinois grain farmers next year.

That’s the only conclusion Gary Schnitkey can draw when he puts the costs up against the incomes for corn and soybeans in 2019. Schnitkey, an ag economist at the Univesity of Illinois, says fuel and fertilizer costs are expected to go up. Prices aren’t and that’s the dismal part says Schnitkey, “Probably the one thing that has changed relative to recent years is that corn is expected to be more profitable than soybeans. Again, that is largely due to our use of $3.60 for a 2019 corn price and $8.50 for soybeans. This switches the profitability around. That’s driven by trade concerns, particularly with China and what that has done to commodity prices.”

Here’s an example of the bottom line for next year’s budget. A northern Illinois farmer might expect to have $174 to split between the farmer and the landowner for corn and $143 for soybeans. This return is considerably below the cost of cash rent and roughly, says Schnitkey, near the 2005 returns.

2019 Crop Budgets Suggest Dismal Corn and Soybean Returns

Even with cost-cutting and savings measures, University of Illinois Agricultural Economist Gary Schnitkey says, for the moment, it seems unlikely farmers will have positive returns on rented farmland in 2019. Todd Gleason has more…

Marketing Corn & Soybeans this Fall


The dramatic fall in the price of corn and soybeans earlier in the year has put farmers in a unique marketing position. They must decide how much of the drop is due to the expected bumper crop size of the harvest and how much comes from the Trump Administration trade policies. University of Illinois Agricultural Economist Todd Hubbs says determining when those disputes might be settled is key to making good marketing decisions.

Great Corn Grind, but Ethanol Stocks are Building

Dan O’Brien from Kansas State University discusses the state of ethanol production and stocks. While grind has been tremendous, stocks are building, and plant profitability looks to be near breakeven.

A Commodity Markets Interview with Todd Hubbs

The commodity markets seemed to have found a bottom for the moment. Todd Gleason has more on what may be next with University of Illinois Agricultural Economist Todd Hubbs.

July WASDE to Reflect Tariffs

This Thursday’s USDA’s monthly supply and demand estimates will include the impact of the Trump Administration’s tariffs. Gary Crawford talks with the chair of the World Agricultural Outlook Board Seth Meyer about the July WASDE. The report is scheduled for release at 11 a.m. central time Thursday, July 12, 2018.

When Farmers Should Spray for Japanese Beetles

Japanese beetles are showing up in corn and soybean fields. These can do enough damage to cause yield losses, but it is fairly unlikely. The University of Illinois has published thresholds for when farmers should spray crops to protect them from the Japanese beetle.

Nick Seiter says there needs to be a lot of beetles and a whole lot damage done before a producer should spend money on a rescue treatment, “Most of the reports that I am getting, as you would expect and as is typical, are below the treatment thresholds. These are 25 percent defoliation after bloom and 35 percent before bloom for soybean and the threshold for silk clipping in corn is consistent clipping to half-an-inch or less regularly throughout the field. I had a question yesterday about what to do when you have both Japanese beetles and corn rootworm clipping silks in the field. The answer is the same, the clipping has to be down to half-an-inch or less consistently through the field while pollination is still ongoing.”

ILLINOIS Extension Entomologist Nick Seiter says farmers have no need to apply a rescue treatment for Japanese beetles until defoliation reaches at least 25 percent after bloom for soybean and silk clipping during pollination is down to half-an-inch or less for corn.

Replacing Petrochemicals with Biochemicals made from Corn


Farmers gathered at the CUTC in St. Louis this week (June 4, 5, 6) to learn about future uses for the nation’s number one commodity crop.

The Corn Utilization and Technology Conference is organized by NCGA or the National Corn Growers Association. It happens every two years and is dedicated to exploring future uses of corn. Vijay Singh is a regular. He works for the agricultural college at the University of Illinois and specializes in engineering ethanol processing plants. Singh sees them expanding to include biochemical production in the near future, “That’s the big thing right now and for that, we need large amounts of sugar. The U.S. is at a major advantage in terms of producing sugars from corn and that comes from the corn processing industry.”

The corn processing industry has long focused on creating food products, high fructose corn syrup, ethanol and some other co-products. However, now that sugar, rather than crude oil, has become the preferred feedstock for producing high-value biochemicals that are used to create consumer products, things like polymers, there is a place for corn in that pipeline.

The U of I engineer says because it is economically feasible dry-grind ethanol plants are starting to produce sugar along with producing ethanol. Those sugars can then be used to produce biochemicals. The biochemicals made from a renewable source, corn, are taking the place of petrochemicals.