MCHENRY, Ill. — Large supplies of soybeans and corn will continue to impact markets in 2018, while wheat prices may be on their way up, officials with Allendale, Inc. recently remarked.
“If I had one word to describe the bean situation we find ourselves in right now, it is ‘oversupply,’” said Jim McCormick, senior trading advisor with the company. “Any way you want to look at it, we are pretty much building stocks at record levels.”
As for corn, “I don’t know how many ways we can say we’ve got a ton out there,” said Steve Georgy, Allendale’s president. “Globally, we’ve been getting tighter on stocks. We become the ones holding all the cards. We become the ones having all of the supply right now.”
The comments came during Allendale’s Jan. 23-25 Ag Leaders Conference Series.
The USDA’s most recent estimate of ending stocks for old-crop soybeans is 480 million bushels, while Allendale is projecting as many as 528 million, McCormick said. Worldwide, stocks are reaching record levels.
Allendale’s price forecast for old-crop soybeans shows a high of more than $10 a bushel in February before falling to under $9.25 in May. The price is expected to rebound to near $10 by July.
For new-crop beans, a high of more than $10.50 is projected in mid-summer, followed by a drop to near $8.50 by November. McCormick cautioned the market might not hit the projected high price for new-crop soybeans.
Soybean supply has been outpacing demand, creating the oversupply, he said. In 2000, demand in the United States was about 2.7 billion bushels; in 2017, it was roughly 4.2 billion. The supply of soybeans totaled about 3 billion in 2000 and nearly 4.7 billion last year.
Exports are a concern, as U.S. sales are running about 13 percent behind last year’s pace, McCormick said. If they don’t improve, ending stocks will grow, making the overall soybean stocks balance sheet look even worse.
Allendale is estimating U.S. farmers will plan 90.19 million acres of soybeans this year, up 55,000 over last year. The acreage would be an all-time high for soybeans and the first time farmers have planted more beans than corn, McCormick noted.
Corn & wheat outlook
While U.S. corn exports are expected to drop slightly in 2018, Georgy said there may be some hope in ethanol. Strong ethanol production numbers were reported toward the end of last year but they’ve dropped to a more normal range since the first of the year.
Allendale is estimating farmers will plant 89.7 million acres of corn, down from last year’s 90.2 million. Ending stocks are expected to remain above 2 billion bushels this year.
“Right now, it’s very hard to do this presentation to tell somebody, ‘Hey, guess what, there’s some optimism in corn,’” Georgy said. “We need to see demand for corn pick up. We need to get through this pile that we have.”
For old-crop corn, Allendale projects a price increase to more than $4 in May, then a drop in June to under $3.50. The price is expected to be just over $4 in July.
New-crop corn is forecast to see a price of more than $4 in April. The price is expected to fall to under $3.50 in June before rallying to just above $4 in July. A steady decline to less than $3.50 is expected by December.
Worldwide wheat production is expected to increase slightly in 2018, which would be the sixth straight year it has gone up. Meanwhile, U.S. exports are struggling, said Rich Nelson, Allendale’s chief strategist. Current sales are about 10 million bushels behind where they should be to meet USDA’s goal.
U.S. farmers planted 32.6 million acres of winter wheat, according to USDA. The number, 88,000 fewer acres than last year, is the second-lowest in recorded history, Nelson said.
On the plus side, Allendale is suggesting wheat prices have bottomed. “The bottom line is, we do look for an exciting rally and we suggest it’s already happening right at this very moment,” he added.
For July 2018 Chicago futures contracts, Allendale is projecting $5 wheat in March, a drop to near $4.25 in April and then a rebound to above $4.75 in May. Prices are forecast to fall to $4.25 by July. For December 2018 futures contracts, prices are estimated to be near $5.50 in April and then range from $4-$5 from mid-summer to November. They could rebound to above $4.50 in December.
Drew Lerner, president of World Weather, Inc., said spring temperatures should be below-normal in Michigan and parts of northern Illinois, Indiana and Iowa. Above-normal temperatures are expected in Tennessee and small areas of southern Illinois and western Kentucky. The rest of this region is projected to have normal temperatures.
Spring precipitation will be near to above-normal in Iowa and northern Illinois, and below-normal in eastern Kentucky and Tennessee. Normal precipitation is expected in the rest of the region.
For the summer, temperatures are forecast to be near to below-normal everywhere in the area except for western Iowa, where they will be above-normal. The precipitation forecast calls for pockets of below-normal rainfall in each state, while other areas could see near to above-normal rain.