Already-bulging U.S. corn and soybean stockpiles are much larger than expected, said a USDA report, compounding the effects of a trade war and bumper crops on the farm economy. Commodity prices fell sharply during the summer, when tit-for-tat tariffs were imposed on U.S. farm exports, and farm income this year is forecast to be the lowest since 2006.
In its Grain Stocks report, the USDA said there were 10 percent more soybeans and 7 percent more corn in farmers’ grain bins and in commercial warehouses on Sept. 1 than it estimated in mid-September. Sept. 1 is the milestone date that marks the start of the new marketing year and the onset of the fall harvest. The quarterly Grain Stocks report is based on a survey of more than 66,000 farmers; the agency also attempts to contact all 8,500 warehouse facilities.
Following the release of the report, futures prices of corn for delivery in December fell by 2 percent and November soybeans dropped by 1 percent at the Chicago futures market. On Oct. 11, the USDA will incorporate the stockpile figures into its monthly forecasts of crop production, consumption, and carry-over supplies. The September crop report estimated a record-large soybean crop of 4.693 billion bushels and the second-largest corn crop, 14.827 billion bushels.
The likely result of larger corn and soybean stockpiles at the start of this marketing year will be larger carry-overs next Sept. 1 than forecast, even if low prices encourage larger purchases by foodmakers, livestock feeders, industrial processors, and exporters. At the moment, the USDA says this year’s soybean crop will fetch the lowest season-average price since 2006/07 while the 2018/19 carry-over will nearly double from the 438 million bushels on hand at the start of this marketing year.
Farmers are likely to shift toward corn in 2019 because of the huge soybean supply, say analysts. Growers planted more soybeans than corn this year for the first time since 1983.
High tariffs engendered by the trade war have throttled U.S. soybean exports to China, which buys two-thirds of the soybeans on the world market. As a consequence, China is leaning heavily on Brazil for soybeans. Analyst Daniele Siqueira of AgRural, a Brazilian consultancy, says the sales bonanza for Brazil may be temporary. Chinese officials have indicated they will try to increase domestic soybean production and rely less on imports.
A radical cut in Chinese demand “in the coming years would be a disaster not only for Brazilian farmers, but for the entire economy of a country that has already been struggling to keep afloat,” wrote Siqueira in an AgriCensus essay.