FOCUS ON AG

Written by Kent Thiesse

Farm Management Analyst and Vice President, MinnStar Bank
August 19, 2019

USDA REPORT SHOCKS THE CORN MARKET

There was a lot of anticipation leading into August 12 USDA Crop Report; however, a very “bearish”
report has resulted in a decline of nearly $.50 per bushel in the December corn futures price from
August 9 to August 19. Most of the Eastern Corn Belt, as well as portions of the Western Corn Belt had
very late planting dates in 2019 and have continued to struggle with challenging crop conditions.
However, more favorable growing conditions in some areas in July have increased 2019 yield
expectations. On August 12, the USDA Farm Service Agency also released the initial listing of 2019
prevented planted acres, totaling over 19 million acres, which has created numerous questions
regarding actual 2019 total planted acres of corn and soybeans that were used in the USDA crop report.

The August 12 USDA Crop Report estimated the 2019 total U.S. corn production at 13.9 billion
bushels, which would be a decrease of 4 percent from the 2018 production level. The 2019 projected
U.S. corn production compares to approximately 14.4 billion bushels in both 2018 and 2017, the
record U.S. corn production of 15.2 billion bushels in 2016, and 14.2 billion bushels in 2014. USDA is
estimating 2019 total harvested corn acreage in the U.S. at 82 million acres, which is down 1.6 million
acres from the July estimate, and compares to 81.7 million harvested corn acres in 2018.

The latest Crop Report projects the national average corn yield in 2019 at 169.5 bushels per acre,
which surprisingly was an increase from the July USDA estimate of 166 bushels per acre. If achieved,
the 2019 yield would compare to 176.4 bushels per acre in 2018, the record U.S. average corn yield of
176.6 bushels in 2017, 174.6 bushels per acre in 2016, and 168.4 bushels per acre in 2015. Many
private grain marketing analysts are questioning the USDA corn yield increase in the August report,
considering the growing season struggles in the Eastern Corn Belt and the fact that weekly USDA crop
progress reports have not shown significant improvement in the corn crop ratings.

USDA is estimating Minnesota’s 2019 average corn yield at 173 bushels per acre, which is well below
the 2018 yield of 182 bushels per acre and record State average corn yield of 194 bushels per acre in
2017. Other recent State average corn yields are 193 bushels per acre in 2016 and 188 bushels per acre
in 2015. USDA is now projecting Iowa’s 2019 average corn yield at 191 bushel per acre, which is also
below the average yield of 196 bushels per acre in 2018, and well below the 202 bushel per acre yield
in 2017 and the record State average corn yield of 203 bushels per acre in 2016.

The 2019 USDA corn yield estimates for the other major corn producing States are Illinois at 181
bushels per acre, compared to 210 bushels per acre in 2018 and 201 bushels per acre in 2017; Indiana
at 166 bushels per acre, compared to 189 bushels per acre in 2018 and 180 bushels per acre in 2017;
and Nebraska at 186 bushels per acre, compared to 192 bushels per acre in 2018 and 181 bushels per
acre in 2017. South Dakota’s 2019 corn yield is estimated at 157 bushels per acre, compared to 160
bushels per acre in 2018; with North Dakota at 146 bushels per acre, compared to 153 bushels per acre
in 2018; and Wisconsin at 165 bushels per acre, compared to 172 bushels per acre in 2018.

The USDA Report on August 12 estimated total 2019 U.S. soybean production at 3.68 billion bushels,
which is a decrease of 19 percent from the record 2018 production level of 4.54 billion bushels. The
2019 projected soybean production level is also well below the 4.39 billion bushels in 2017 and 4.3
billion bushels in 2016. USDA is now estimating total 2019 harvested soybean acreage at 75.9 million
acres, which compares to 88.1 million acres in 2018 and 89.5 million acres in 2017.
USDA is projecting the 2019 U.S. average soybean yield at 48.5 bushels per acre, which is unchanged
from the July estimate. The 2019 estimated U.S. soybean yield compares to recent national average
soybean yields of 51.6 bushels per acre in 2018, 49.1 bushels per acre in 2017, the record average
soybean yield of 52.1 bushels per acre in 2016. Minnesota’s 2019 average soybean yield is estimated at
45 bushels per acre, which compares to 48 bushels per acre in 2018, 47 bushels per acre in 2017 and
the record State soybean yield of 52.5 bushels per acre in 2016. Iowa is projected to have a 2019
soybean yield of 55 bushels per acre in 2018, compared to 57 bushels per acre in 2018, 56.5 bushels
per acre in 2017 and the State record of 60.5 bushels per acre in 2016.

Other projected 2019 yields in major soybean producing States include Illinois at 55 bushels per acre,
compared to 65 bushels per acre in 2018; Indiana at 50 bushels per acre, compared to 58.5 bushels per
acre in 2018; and Nebraska at 58 bushels per acre, compared to 59 bushels per acre in 2018. South
Dakota is projected to have a 2019 soybean yield of 45 bushels per acre, compared to 46 bushels per
acre in 2018; with North Dakota at 35 bushels per acre, compared to 35.5 bushels per acre in 2018; and
Wisconsin at 47 bushels per acre, compared 49 bushels per acre in 2018. Total 2019 harvested soybean
acres in Minnesota, North and South Dakota is estimated at 15.9 million acres, which is down
considerably from over 20 million acres in 2018.

AUGUST 12 WASDE REPORT

The updated USDA World Supply and Demand Estimates (WASDE) were also released on August 12.
This report included the 2019 estimated U.S. corn production of 13.9 billion bushels, with an increase
in the 2019-20 corn ending stocks compared to the July estimate. The 2019-20 corn ending stocks are
now estimated at nearly 2.2 billion bushels, compared to the projected 2018-19 corn ending stocks of
2.36 billion bushels. The report showed a slight decrease in expected corn usage for ethanol production
2019-20, while projecting a more significant decrease in corn exports for 2019-20 marketing year. The
higher projected corn ending stocks for both 2018-19 and 2019-20 reverses the trends from earlier this
year, which indicated tighter ending stocks in the coming months.

USDA is projecting an average on-farm corn price for the 2019-20 marketing year, which runs from
September 1, 2019, through August 31, 2020, at $3.60 per bushel, which is a decline from the $3.70
per bushel estimate in July. The 2018-19 national average corn price, which will be finalized on
September 30, 2019, is now estimated at $3.60 per bushel, which compares to national average prices
of $3.36 per bushel in both 2017-18 and 2016-17, and $3.61 per bushel for 2015-16.

The recent WASDE estimates are projecting a 2019 U.S. soybean production of 3.68 billion bushels in
2019. USDA lowered the estimated export levels from the July estimates and left the 2019-20 soybean
crush levels unchanged. This would result in estimated 2019-20 soybean ending stocks at 755 million
bushels, which would be a significant decline from the projected ending stocks of 1.07 billion bushels
for 2018-19; however, it is still well above the 2017-18 soybean ending stocks at 430 million bushels.

USDA is now projecting an average on-farm soybean price for the 2019-20 marketing year at $8.40
per bushel, which is unchanged from the July estimate. The 2018-19 final national average soybean
price is estimated at $8.50 per bushel, which compares to 12-month national average prices of $9.33 in
2017-18, $9.47 per bushel in 2016-17, and $8.95 per bushel in 2015-16.

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Note --- For additional information contact Kent Thiesse, Farm Management Analyst and Senior
Vice President, MinnStar Bank, Lake Crystal, MN. (Phone --- (507) 381-7960);
E-mail --- kent.thiesse@minnstarbank.com) Web Site --- http://www.minnstarbank.com/