U.S. Economy Slows as Corn and Soy Output Soar, According to USDA Projection

With a return to normal weather, farmers will expand vastly their corn and soybean plantings next year — enough to produce their largest corn crop ever and the fourth-largest soybean crop, according to USDA's agricultural projections. Bumper crops will drive down market prices in the near term and create huge stockpiles that will take years to whittle down.

Meanwhile, economic growth will slow in the U.S. to less than 2% annually, constraining domestic demand for food and fiber, said the projections released on Friday. Growth would slow as well in Japan, rise in Canada, Mexico, and South Korea and hold steady in the EU. Canada, Mexico, the EU, Japan, and South Korea, in that order, are the top customers for U.S. farm exports.

The decline in U.S. economic growth would be buffered by comparatively stable, albeit slightly rising, crude oil prices and interest rates. Agriculture is a heavy user of petroleum as fuel and lubricant and of products, such as pesticides, made from it. Low-interest rates have helped sustain farmland values since the commodity boom collapsed early this decade. Land accounts for more than 80% of farm assets.

Farm income plunged in 2014, as the commodity boom faded. Net farm income, a measure of wealth, is forecast at $88 billion this year, roughly 70% of the peak year of the boom. Direct federal payments will equal 22% of net farm income this year, the largest share since 2006, when the boom was beginning. The USDA is scheduled to update its income forecast on November 27.

The USDA released a portion of its long-term projections as part of the build up to its annual Agricultural Outlook Forum in late February. The early release tables cover macroeconomic assumptions and projections of crop and livestock production in the decade ahead. They assume normal weather and yields and that the farm program will not change. The complete version of the agricultural baseline will include an estimate of farm income and the outlook for crops and livestock around the world as well as in the U.S.

In its projections, the USDA said corn plantings would rise 5% and soybeans 10% in 2020. The 94.5 million acres of corn would yield 15.55 billion bushels of corn, topping the record of 15.15 billion bushels set in 2016. Soybean plantings of 84 million acres would bring a crop of 4.2 billion bushels, the fourth-largest on record.

U.S. stockpiles would skyrocket. Some 2.75 billion bushels of corn — nearly a 10-week supply — would be in storage when the 2021 crop was ready for harvest. So-called carryover stocks would run in the range of 2.75 to 2.85 billion bushels through 2029. The soybean stockpile jump to 518 million bushels, the third-highest ever, during the 2020/201 marketing year and stay above 500 million bushels until 2025.

Soybean exports ran at 2.1 billion bushels annually before the trade war with China. They would regain that level in the 2024/2025 marketing year, according to USDA's long-term projections.

This year's corn crop is forecast to fetch an average $3.80 a bushel. Season-average prices would drop to $3.40 a bushel in 2020 in the face of record production and large supples. In the same vein, soybean prices, forecast to average $9 a bushel for the 2019 crop, would fall to $8.85 a bushel in 2020, according to USDA.

Corn and soybeans are the two most widely grown crops in the country, totaling 166 million acres this year. Production is lower than usual this year due to planting delays caused by the rainiest spring in a quarter century.

The USDA projected wheat plantings of 45 million acres in 2020, down marginally from this year, cotton plantings of 11.8 million acres, down by 13% from this year, and rice plantings of 2.9 million acres, up 400,000 acres from 2019.

The early release tables are available here.