-May soybean crush slightly lower than expected, but still easily record high
-May soybean oil stocks higher than expected-May corn for ethanol usage recovers modestly from April, but supports need for notable downward USDA demand revision
USDA reported U.S. soybean crush in May was 179.6 million bushels, slightly below the average trade estimate of 180.7 million (180.0-182.0 million range of ideas) and was down slightly from 183.4 million bushels, but a solid 8.5% above last year’s May crush of 165.4 million bushels. Moreover, as expected, a new record for the month of May was set in easily eclipsing 2018’s 172.5 million bushels, with 2019/20 marketing year-to-date (Sept-May) crush hitting 1.628 billion bushels vs 1.577 billion last year. Based on the USDA’s 2.140 billion bushel annual crush estimate, June-Aug crush will need to total 512 million bushels, a mere 2 million below last year’s 514 million, which was just shy of the record 4th quarter crush of 518 million bushels in 2017/18. With board crush margins the lowest in six years for early July, it’s hard to not have some doubt of running at a near-record crush pace to end the marketing year. We’re maintaining our 2019/20 crush estimate of 2.135 billion bushels for the time being. USDA reported U.S. soybean oil production in May was 2.058 billion pounds vs 2.099 billion in April and 1.916 billion last year May, with the average soybean oil yield little-changed at 11.46 vs 11.45 in May, but remaining well below last year’s 11.58. End May U.S. soybean oil stocks were reported at 2.447 billion pounds, solidly above the average trade estimate of 2.372 billion pounds and at the very top of the range of ideas of 2.250-2.450 billion. While May stocks were down from 2.602 billion in April, they were significantly larger than year ago May stocks of 2.019 billion pounds, while being the largest in four years and matching 2013/14 for the 2nd highest May stocks of the last seven years. Interestingly, U.S.-total soybean oil stocks were 30.2% larger than NOPA-member stocks of 1.880 billion pounds, considerably more than the 23.2% average over the previous three months and the largest deviation between the two since July 2019. Based on estimated May exports, domestic soybean oil usage in the month was implied down 8% from last year, with marketing year-to-date (Oct-May) domestic usage of 14.18 billion pounds down 6.3% from last year’s 15.13 billion. The USDA’s 2019/20 total domestic soybean oil usage estimate of 22.100 billion pounds reflects an expected 3.4% decline from last year. The nearly 1.0 billion pound decline in domestic usage year to date already exceeds the USDA’s estimated 774 million pound annual decline, prompting a needed year-over-year increase from June thru Sept to prevent a downward revision in the USDA’s estimate. May soybean meal/hull production of 4.241 million tons compared to 4.312 million in April and 3.910 million tons last year. Based on estimated exports for the month, domestic soybean meal usage was indicated up roughly 3.4% from last year, with marketing year-to-date domestic usage of 25.1 million tons up 4.6% from last year’s 24.0 million, while the USDA’s annual estimate of 37.5 million tons reflects an expected 3.9% increase from last year.
USDA reported 300 million bushels of corn was used for ethanol production in May, a decent recovery from April’s 245 million bushels, but still obviously a massive 160 million bushels less than last year’s May usage of 460 million bushels. This puts 2019/20 marketing year-to-date corn for ethanol usage at 3.638 billion bushels, down 378 million bushels (9.4%) from last year’s 4.016 billion. Based on estimated weekly corn used for ethanol production over the most-recent four weeks since today’s official monthly data through May, we see the marketing year-to-date corn demand loss relative to last year at 464 million bushels vs the USDA’s 4.900 billion bushel annual usage estimate reflecting an expected 478 million bushel loss for the entire marketing year. Obviously, a downward revision in the USDA’s current estimate is necessary. Over the last several months, there has been an uptick in ethanol yields/bushel of corn used, which is a detriment to limiting the likely downward revision in the USDA’s demand estimate, as well. While April and May implied ethanol yields were unusually variable (likely a statistical anomaly), the average yield over the last four months of 2.93 gallons/bushel was up from the average over the previous five months of 2.90. With more ethanol produced from fewer bushels of corn, the average “needed” ethanol production rate rises in order to consume the same number of bushels of corn. Based on the slightly higher yield assumption over the remainder of the marketing year, we estimate ethanol production would need to run a mere 1% below last year’s pace during July-Aug to reach the USDA’s annual corn usage estimate of 4.900 billion bushels vs the 16-17% declines seen the last two weeks. Moreover, with the new yield assumption, corn for ethanol usage would fall 100 million bushels short of the USDA’s target if ethanol production averaged a 12% decline through the end of August. We expect USDA to lower their estimate by at least 50 million bushels in the July 10 WASDE report, with a larger reduction justified in our opinion. USDA reported only 3.7 million bushels of sorghum was used for ethanol production in May, resulting in corn accounting for 98.8% of total feedstocks used, the highest proportion since April 2018. USDA reported 1.234 million tons of DDGS were produced in May vs 1.014 million in April and 1.943 million tons last year May. For the 2019/20 corn marketing year-to-date, DDGS production of 15.1 million tons compares to 16.9 million tons during the same period last year.