November 6, 2020 Markets & Management Update:
Weather is unpredictable from year-to-year. In my limited travel this year, I did not see as much of Pennsylvania compared to last year, but in southcentral Pennsylvania, most corn and soybean fields looked good. However, it was obvious that there were drought conditions in some of the western and northern parts of the state this summer. Across much of the U.S. this year, weather conditions were conducive for a good growing season, which shows in USDA’s latest Crop Production report.
The October report predicted record yields for both corn and soybeans this year. U.S. corn yield is estimated to be 178.4 bu/A. Corn production from 82.5 million acres harvested is expected to reach 14.7 billion bushels. This represents an additional 1.1 billion bushels of corn production with 1.2 million more acres harvested compared to 2019. Pennsylvania corn yield is expected to be below the national average at 157 bu/A. However, Pennsylvania yield is estimated to be 4 bu/A more than 2019. At 157 million bushels of total corn production, state production is down 518,000 bushels compared to 162 million bushels in 2019. Less corn acreage is expected to be harvested this year, resulting in lower total production. About 1 million acres of corn are expected to be harvested in the Keystone State this year, 60,000 less than last year.
At an estimated 51.9 bu/A, U.S. soybean yield is also expected to be a record and is 4.5 bu/A more than 2019. A total of 4.3 billion bushels of soybeans are expected from an estimated 82.3 million acres harvested. Soybean yield is up 4.5 bu/A compared to last year, and total production is expected to be up 716 million bushels from 7.4 million additional acres harvested. Pennsylvania soybean yield falls short of the national average as well. At an estimated 49 bu/A, soybean yield is expected to be the same as 2019. However, total production is expected to be down 245,000 bushels to 29.6 million from an expected 5,000 acres less harvested than last year (605,000).
The latest USDA Crop Progress report released on November 2 shows that the 2020 national corn and soybean harvest is ahead of schedule. Corn harvest across the country is 82% complete and soybean harvest is 87% complete compared to the five-year averages of 69% and 83%, respectively. The corn harvest in Pennsylvania is on schedule compared to the 5-year average. The state’s corn harvest is 58% complete compared to the 61% 5-year average for the last week of October. Pennsylvania is not one of the top 18 soybean producing states, so it is not included in this report.
The USDA has released an updated DMC Decision Tool for 2021 Dairy Margin Coverage (DMC). This tool can be found at www.dairymarkets.org/dmc/. Instead of listing projected margins, the new tool allows users to examine what U.S. all-milk price floor would be set by each margin coverage by comparing projected DMC feed costs to each DMC margin. Based on Nov. 2 closing prices, the average 2021 DMC feed cost is projected to be $9.48 per cwt. Adding the average feed cost to the maximum margin coverage of $9.50 per cwt yields a projected U.S. all-milk price floor of $18.98 per cwt for 2021.
The U.S. all-milk price is not traded on the CME. The average difference between the U.S. all-milk price and Class III since Jan. 2018 is $1.24 per cwt. Subtracting this difference from the all-milk price gives a Class III reference floor of $17.74 for next year that can be compared to 2021 Class III milk futures. 2021 DMC enrollment can be completed at your local FSA through December 11, 2020.
