December 2020

A trade-driven market

The 2020 calendar year continues to provide surprises around each bend. But at least for agriculture, the year is finishing out on a strong note. Despite the drought and derecho, agricultural production was robust. If the current USDA yield projections hold, the 2020 corn crop will be the 3rd largest on record, while the 2020 soybean crop will be the 4th largest ever.

Normally, strong production numbers like those drive harvest-time prices to calendar year lows. Instead, we saw prices rise throughout harvest. For that to happen, we needed a surge in demand from somewhere. That surge came from the international marketplace.

During the latter half of 2020, export sales across the agricultural complex have raced higher. The increase in ag sales covers many crop and livestock markets, so the international surge is not specific to one product or one particular use. Viruses are a critical part of the story, and it’s not just the coronavirus. The lingering impacts of African Swine Fever continue to shape the Chinese protein market and the potential for meat trade across the globe. COVID-19 highlighted challenges in global ag supply chains and fostered increased desires to lock in purchases in a timely manner. And while the global economy has taken a step back with the COVID-19 shutdowns and restrictions, global needs for protein and feed grains continue to rise. Trade flows are also showing the results of the signed trade deals from the past couple of years: Phase One with China, USMCA, Japan, and South Korea.

International sales have been the driving force in the soybean market for the past decade. So it’s not unusual for traders to fixate on soybean export sales. But the pace of sales for the 2020 soybean crop has been more than enough to impress traders and send prices significantly higher. As I write this article, USDA has released the export sales data covering the period from the beginning of the marketing year (Sept. 1, 2020) to the week ending just before Thanksgiving. Those 12 weeks of data have provided the fuel for the price rallies across agriculture. For soybeans, the export surge has translated into a doubling of sales compared to this time last year. Figure 1 outlines the various components of the surge. In the figure, the current list of the top 6 soybean sales markets are listed in order. The bar shows the change in soybean sales year-over-year in bushels and the percentage shown with each bar gives the percentage change in sales year-over-year. The seventh bar shows the change in sales to unknown destinations, sales that have been made to international companies, but where the delivery point has not yet established. The eighth bar, titled “Other”, displays the accumulated sales to countries outside of the top 6 markets. The final bar shows the total global shift in US soybean sales. As the figure shows, the soybean surge is nearly completely driven by China and unknown destinations. Since soybean sales to unknown destinations most often end up in China, the reality is that the soybean story is all about China. The trade fight between the US and China had significantly reduced soybean trade between the two countries over the past couple of years, but China had remained our top market for soybeans. With the signing of the Phase One trade deal and China’s efforts to rebuild their hog herd following the African Swine Fever outbreak, US-China soybean trade was set to rebound. However, the strength of the rebound was surprising with sales into China basically tripling compared to last year at this time. The sales to unknown destinations tripled as well. The combination meant that nearly one billion more bushels of soybeans have already been purchased in the international marketplace before Thanksgiving. While we have seen some increased demand from other countries, notably Mexico, Egypt, and Indonesia, the changes outside of China are being swamped by the changes within China.

figure 1. Soybean export sales shifts

China is not the only reason export sales have found another gear. The corn market is experiencing a much broader increase in international demand. As Figure 2 displays, the increase in corn sales is happening across not only the current top six export markets, but also in unknown destinations and throughout the rest of the world. China is a major player, for the same reasons as with soybeans, due to the Phase One deal and the hog herd recovery. Historically, China has been a small to nonexistent corn market for the US as China is the 2nd largest producer of corn in the world and generally produces enough corn to meet domestic needs. However, the trade deal and herd rebuilding have created a record-setting opportunity for US corn, as export sales to China have grown to over 400 million bushels, currently placing China as the top destination for US corn. But other trade deals are also promoting US corn in international markets. The trade agreements with Japan and South Korea have provided substantial support as well, with Japanese purchases more than doubling and South Korean purchases growing by over 3000%. Corn sales to Central and South America are on the rise, with Mexico, Colombia, and Guatemala each purchasing at least 15% more this year. Corn export sales growth outside of the top markets is up 50% as well. It is this broad-based surge in corn sales that prompted USDA to project record corn exports this marketing year.

figure 2. Corn export sales shifts

USDA’s current supply and use tables provide the fundamentals behind the price rallies. For corn, the growth in production has been more than met by increases in usage. While the 2020 crop is the 3rd largest, the projected corn usage for the 2020 marketing year (highlighted in the gray box) is set to be a record. Feed and residual usage has been high last marketing year and this one as meat production continues to build to record levels. Corn usage for ethanol is projected to rebound somewhat, following the COVID-induced declines. But the major swing is in exports, with 2.65 billion bushels of US corn headed to international markets. With total corn usage set at 14.825 billion bushels, corn stocks are projected at 1.7 billion bushels. The second year of stocks decline allowed USDA to raise its’ season-average price estimate to $4 per bushel, the highest level since 2013.

tables 1-2

For soybeans, it’s a similar tale. The growth in production has been more than met by increases in usage. While the 2020 crop is the 4th largest, the projected soybean usage for the 2020 marketing year is set to be a record. Crush demand is supported by record meat production. And the major swing is in exports, with 2.2 billion bushels of US soybeans headed to international markets. With total soybean usage set over 4.5 billion bushels, soybean stocks are projected at 190 million bushels. The second year of stocks decline allowed USDA to raise its’ season- average price estimate to $10.40 per bushel, the highest level since 2013.

The futures markets have mostly agreed with this assessment or have been even more positive. As the trade wrapped up on November 30th, the futures- based estimates for the season-average prices stood at $3.98 per bushel for corn and $10.70 per bushel for soybeans. So USDA and the futures market are aligned on corn, with futures providing a slightly better outlook for soybeans. Looking beyond 2020, futures prices indicate a small pullback for corn and a larger decline for soybeans, mainly based on expectations that more land will move into soybean production next year.

Chad E. Hart, extension economist, 515-294-9911,


Chad E. Hart

extension economist
Iowa State University
468E Heady Hall
View more from this author