USDA’s final crop estimates for 2020 turned out better than 2019, but well below initial expectations for the season.

That, combined with a recent surge in demand, sent stocks plummeting while adding more fuel to a market already on fire in recent months.

The corn market jumped to limit-up positions while prices rallied another 50 cents for soybeans and 30 cents for wheat following USDA’s final crop production, stocks, and supply and demand estimates Tuesday. Crop prices reached near $5 per bushel for corn and $14 per bushel for soybeans.

“Obviously, it was quite a bullish reaction,” said Karl Setzer, AgriVisor commodity risk analyst. “The buying power today is just incredible.”

USDA pegged 2020 corn production at 14.182 billion bushels, down 324 million bushels from the previous estimate but up 4% from 2019. The story was similar for soybean production, estimated at 4.14 billion bushels in 2020, down 35 million bushels from the previous estimate but up 16% from 2019 when farmers filed a record amount of prevented plant claims.

The final national yield estimates averaged 172 bushels per acre for corn and 50.2 bushels per acre for beans.

In Illinois, USDA projected average yields for 2020 of 192 bushels per acre for corn (compared to 181 bushels in 2019 and 210 bushels in 2018) and 59 bushels per acre for soybeans (up from 54 bushels in 2019 but down from 63.5 bushels in 2018).

USDA initially projected yields for 2020 of 181.8 bushels per acre for corn and 53.3 bushels nationally back in August before weather issues clipped the crops.

“A couple of numbers jump out,” Setzer told the RFD Radio Network. “The corn yield is down to 172 and production dropped from 14.5 billion to 14.18 billion bushels.

“That’s a big cut there,” he continued. “Our total supply dropped nearly 400 million bushels for corn.”

USDA cut ending stocks by 150 million bushels for corn (to 1.552 billion bushels), 35 million bushels of soybeans (to 140 million bushels) and by 19% for wheat to 836 million bushels.

The Ag Department subsequently raised its 2020/21 season average price estimates by 20 cents for corn (to $4.20 per bushel), 60 cents for beans (to $11.15) and by 15 cents for wheat to $4.85.

As for quarterly stocks, corn stored in all positions totaled 11.3 billion bushels as of Dec. 1, down slightly from last year and down 1% on farms; 2.93 billion bushels of beans, down 10% from last year and down 14% on farms; and 1.67 billion bushels of wheat, down 9% from last year and down 7% on farms.

With the stocks to use ratio down around 10% for corn, Setzer noted crop prices could be approaching levels that drive demand rationing.

“We stand a chance to cut our demand a little bit from here,” he said. “Be realistic (for marketing plans). There’s no carry in this market.”

USDA trimmed 250 million bushels off its corn use estimate, including 100 million bushels off exports and 100 million bushels from ethanol demand.

“We need to sit back and look at the big picture,” Setzer said. “These rallies and values are encouraging more global production.

“And, a lot of the rally was brought on by the managed money crowd,” added the analyst, who suggested considering locking in some new crop values. “A lot of us cheer them on when they’re coming into the market, but we could see them pull money back out.”

USDA also cut its latest estimate of soybean production by 2 million metric tons in Argentina and 200,000 metric tons in Uruguay reflecting dry conditions the past two months.