INDIANAPOLIS, Indiana — Soybean and corn prices will either be steady or lower in 2020 as production in the United States is expected to improve, according to a market analyst.
The predictions largely assume that the growing season will be good, that a U.S.-China trade deal might not be reached and African swine fever (ASF) will persist, suggested Seth Meyer, who was formerly U.S. Department of Agriculture World Agricultural Outlook board chair and is now a research professor at the University of Missouri.
Despite the bleak prediction, Meyer said the year won’t be as bad as the 1980s.
“These are bad times but they aren’t as unusual as 2010 and 2015,” he said, speaking to members of the National Grain and Feed Association at the Country Elevator Conference mid-December in Indianapolis.
“We have debt-to-asset ratio creeping up but not where we were near in the 80s,” he said.
Last year was difficult for producers in Canada and the U.S. Chinese tariffs and restrictions on agricultural products, for example, made exports difficult. As well, bad weather hampered corn seeding in the U.S., while a wet fall significantly delayed harvest on the Prairies.
But if U.S. producers experience good weather this year, much of their products could still end up being stored, Meyer said.
He explained that soybean demand is expected to worsen if cases of ASF continue in China. As well, Brazil has become a big exporter of soybeans, meaning they are better able to fill demand.
He said Brazil has been strong at exporting both corn and soybeans. In the case of corn, there has been a lack in export progress from the U.S.
“We were not price competitive and they were exporting strongly into our own marketing year,” Meyer said. “The Brazilians, for a lack of a better word, were eating our lunch right at U.S. harvest.”
Meyer added that U.S. exports are improving, although Brazilian exports remain strong.
“It will be the norm that Brazilian crop is bigger than the U.S. crop in overall soybean production,” he said.
“We are constrained in area. They aren’t.”
He said U.S. corn exports to China will likely be similar to last year if there is no trade deal between the two countries.
As well, if ASF continues to decimate herds, there will be less demand for soy, he said.
Despite these indicators, he expects American producers to rebound in soybean and corn production. Some crop will go into carryover stocks, he said, though producers may have a choice on which crop they want to keep and which they want to sell.
“Seems like greater stocks for both crops, so which one are you going to plant and which one is going to go into storage?” he asked the audience.
He said soybean carry-out stocks managed to decrease from 900 million bushels to 450 million bushels. That may seem like good news, but 450 million is still a huge number, he said.
“In the absence of a trade deal that pulls more of those beans off, and in the face of ASF, soybeans at the farm level might be more in range of $8.50 per bu.,” he said.
He suggested producers could look to domestic markets.
Meat production has increased in the U.S., given the economy has spurred more demand. The country also has increased slaughter capacity, he added, which has kept prices in line.
All this can change if the U.S. and China strike a trade agreement, he added.
U.S. President Donald Trump has signalled a deal is imminent.
As for wheat, Meyer said prices might increase given production is expected to be lower. Despite the potentially improved price, he said it likely won’t be a great price for American growers.
During his presentation, Meyer spoke of the US$14.5 billion support package the U.S. government has given to farmers impacted by the trade dispute with China.
He said many farms would have been in the red if it wasn’t for the funding. It has largely gone to soybean growers.
However, he said farmers have been skeptical about what will happen to the program if a new trade deal is signed. Some have wondered if they will still get the funds if China doesn’t follow through on future promises.
“Part of me says it’s an election year and another part says the Chinese are more able to affect their own demands on traders than we are in the United States,” Meyer said, speaking about skepticism from farmers about the program.