A new report from the Department of Agriculture reduced the expected corn and soybean production this year, a move that also boosted the government’s expectations for commodity prices.

USDA’s most recent World Agricultural Supply and Demand Estimates report cut projected corn production to 14.7 billion bushels, a 178-million bushel decrease due to drops in harvested area and a slight yield reduction. Soybean production estimates arrived at 4.3 billion bushels, a 45-million bushel reduction.

“What the government is saying is that this price rally that we’ve been having here … we’re justified,” Don Roose with U.S. Commodities told Agri-Pulse. Corn, soybean, and wheat prices all adjusted higher in the immediate wake of the report; USDA also raised the projected prices for corn — up 10 cents to $3.60 per bushel — and soybeans — up 55 cents to $9.80 per bushel.

American Farm Bureau Federation economist Shelby Myers said the amount of the soybean price hike was unexpected.

“That is a significant raise in USDA terms in my opinion,” she said. “That’s an unusual jump to do for a season average price, but smaller supplies, increased exports, things are moving, and that’s what we wanted to see.”

The report also dropped soybean ending stocks to 290 million bushels, a 170-million bushel decline from the previous report, based on smaller supplies and increased exports.

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“The average guess was more like 360 million, so that was more than we thought,” Roose said. “Our export pace has been very strong to China, so kind of coming in line with some of those things.”

Roose noted a number of factors could shape the coming price and market expectations, such as domestic yield information as harvest continues and the impacts of the coronavirus on the broader economy, but he said the beginning of a new growing season internationally should also be on traders’ radars.

“We’re going to start to switch fairly rapidly from North America to South America production and weather,” he said.

Other key findings in the WASDE report:

  • Wheat supplies were reduced 32 million bushels “on the combination of lower beginning stocks and production”
  • Grain sorghum production was pushed higher on a 0.2-bushel-per-acre production increase
  • Cotton production was lowered less than 1% to 17 million bales.
  • The current rice forecast is for increased supplies, unchanged domestic use and exports, and higher ending stocks
  • U.S. beet sugar production for the 2020/2021 season was increased about 41,000 short tons, raw value
  • Beef, broiler, and turkey production were all raised, but pork production was reduced on lower second-half commercial hog slaughter and lighter carcass weights.

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