CORN & SOYBEANS: Since we just had one of the biggest USDA reports of the year yesterday, this week’s Turner’s Take Weekly will only focus on Corn and Soybeans. No limit up or limit down surprises yesterday in the Jan 12 USDA reports. Soybeans were the biggest surprise and the USDA did not lower ending stocks as was projected by the industry analysts. This caused Soybeans to come down about 33 cents in old crop and 24 in new crop.
After going through the USDA data yesterday we updated our Supply and Demand tables for Corn and Beans. Below for Corn we have the 2014-15 (old crop) and then two scenarios for new crop corn (2015-16). One scenario is for a trend line yield and the second is for significant production issues due to adverse weather conditions. We did the same for soybeans.
The way we see it is Corn will be much more sensitive to production disruptions than Soybeans. We see Corn acres at 88 million. With a trend line 167.2 yield and conservative demand estimates, we get ending stocks for new crop corn at 1.588 billion. While this is adequate and would keep corn around $4.00, a significant drop in yield could cause substantial rallies and even price rationing. In the last column of the Corn table we have projections for a 155 yield, a 7% drop in yield, which is not out of the question if we have weather issues this year. With a reduction in yield by 12 bushels we see carryout dip below 1.0 billion and corn over $6.
Soybeans on the other hand don’t seem to be as sensitive to weather rallies for new crop. We are assuming it is a given the South American crop is as big as projected and we get 87.5 million acres (we are projecting corn loses 5% and soybeans gains 2.0% in acres this year). With 87.5 million acres and a 46.0 yield, we see ending stocks in the 500 to 600 range and soybean prices in the $8 area. However, if we have almost a 9% loss in yield to 42.00, carryout is still over 300 million bushels and did not have to adjust any demand numbers.
Finally, we have a monthly chart of continuous soybeans divided by continuous corn, also known as the Soybean/Corn ratio. We have been getting a lot of questions and/or comments about how can the S/C ratio go below 2.2 or 2.3? If you look at the chart below, we can see the ratio go to 2.0 or lower in times when Corn stocks are tighter than Soybean stocks. I think in a normal market the ratio can get to 2.0. I think if we have severe weather issues this summer that impact both corn and soybeans, then the ratio can go even lower.
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Turner’s Take USDA Corn and Soybeans Supply and Demand Table:
Monthly Soybeans/Corn Ratio Chart:
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