COLUMBIA, MISSOURI, U.S. — The Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri, in its five-year Baseline Update for U.S. Agricultural Markets released Aug. 28, forecast lower prices for wheat, corn and soybeans in 2019-20 and 2020-21 as trade issues and ample supplies take their toll on U.S. agriculture.
“Excessive spring rains, trade disputes and African swine fever (ASF) have disrupted agricultural markets,” FAPRI said. “In spite of reduced 2019 U.S. corn and soybean production prospects, prices for many commodities are under downward pressure because of the many factors that have weakened demand.”
The current outlook was prepared the week of Aug. 19, using the U.S. Department of Agriculture’s August Crop Production data. FAPRI noted several assumptions and uncertainties in updating the outlook from April. China’s 25% retaliatory tariff on U.S. soybeans and other farm products were assumed to remain in place, and the economy was assumed to evolve with slower economic growth in 2019 and 2020 but no recession.
“Assuming a return to more normal weather conditions in 2020, projected corn and soybean production rebounds,” FAPRI said.
Corn production in 2020 was forecast at 14.979 billion bushels, up 8% from 13.901 billion bushels as the USDA’s August forecast for 2019. Soybean outturn in 2020 was projected at 4.154 billion bushels, up 13% from 3.680 billion bushels currently forecast for 2019, which is down 19% from 2018.
Soybean prices are expected to be pressured by reduced demand from China due to ASF and the ongoing trade war.
“ASF has sharply reduced hog inventories in China, which implies less demand in China for soybean meal and corn as livestock feed,” FAPRI said. “Also weighing on U.S. soybean exports are China’s tariffs.”
Soybean prices paid to farmers were forecast at $7.94 per bushel in 2020-21, compared with $8.43 per bushel in 2019-20, $8.50 per bushel in 2018-19 and $9.33 per bushel in 2017-18. Prices were forecast to recover to $8.20 per bushel in 2021-22 and climb to $8.58 per bushel by 2024-25.
“As with soybeans, projected U.S. corn prices do not increase in 2019-20, even though estimated production is down by half a billion bus from the previous year,” FAPRI said. “Weak export sales and stagnant ethanol use are contributing factors.”
Corn prices were projected at $3.39 per bushel in 2020-21, compared with $3.59 per bushel in 2019-20 and $3.60 per bushel in 2018-19. Corn prices were projected to increase gradually beginning in 2021-22.
Soybean meal prices were forecast to average $298.58 per ton in 2019-20, down 3.7% from $310 per ton this year, and falling further to $283.36 per ton in 2020-21 as production continues to climb along with higher soybean production before rising in 2021-22.
Soybean oil prices in 2019-20 were projected at 30.61¢ per pound, up 9% from 28¢ forecast as the average for the current year. As with soybean meal, the average price was projected to fall further in 2020-21 before recovering in 2021-22.
All wheat production was projected at 1.874 billion bushels in 2020, down 5% from 1.980 billion bushels currently estimated by the USDA for 2019. Production was projected to rebound modestly to 1.990 billion bushels by 2024.
“Wheat prices average about $5 per bushel over the next five years, given large global supplies and demand-side competition with corn,” FAPRI said.
The average farm price of wheat was forecast at $4.92 per bushel in 2020-21 compared with $5 per bushel in 2019-20 and $5.16 per bushel in 2018-19. After slipping to $4.91 per bushel in 2021-22, wheat prices were forecast to recover modestly to $5.15 per bushel by 2024-25.
U.S. all rice production was projected at 216 million cwts in 2020-21, up 5% from 205.4 million cwts forecast for the current year. The average farm price was projected at $12.28 per cwt, up 8¢ from 2019-20, but at $12.16 in 2021-22, down 12c, with little change in pricing for the duration of the outlook period.
Oats production was forecast at 63 million bushels in 2020-21, up 5% from 2019-20, rising to 65 million bushels in 2021-22 but then leveling at 64 million bushels going forward. The forecast price of $2.88 per bushel in 2019-20 was the highest of the forecast period, with later prices forecast to range between $2.73 and $2.79 per bushel.
FAPRI forecast real GDP growth between 1.6% and 1.9% from 2020 through 2024, compared with 2.6% expected in 2019. Consumer Price Index inflation was forecast at 2.2% through 2024, rising from 1.9% in 2019.
“Markets will continue to evolve as we get more information about the size of the 2019 crop, the state of trade disputes and the health of the general economy,” FAPRI said.