USDA took a classic “wait and see†attitude with this month’s WASDE report, minimally revising U.S. balance sheets despite record-strong buying by China of corn and soybeans, while also leaving South American production and export estimates unchanged, as well. Appropriately so, though, USDA further solidly raised China’s corn imports, but the overall reflection of today’s report was disappointment by the “bulls†without anticipated demand revisions being made for corn in particular.
A summary of key report numbers relative to market expectations is attached to this post as a PDF file.
Corn
Despite China buying around 6 MMT of U.S. corn in a matter of days in late January and pushing total U.S. export commitments to 87% of the USDA’s annual export projection heading into today’s report with seven months to go in the marketing year, USDA opted to raise 2020/21 U.S. corn exports by only 50 million bushels to 2.600 billion. Based on the new estimate, total sales on the books now represent 85% of the USDA’s export projection, leaving sales from this point forward only able to average roughly 12 million bushels/week through the end of August vs last year’s 28.6 million/week average from this point forward. Needless to say, the lack of a more significant increase is, quite frankly, shocking and will largely be discounted by market participants moving forward. However, it is the balance sheet the market is dealt until the next update on March 9 and will be used as the “starting point†in next week’s USDA Ag Outlook Forum initial “semi-official†views of the new crop, 2021/22, situation.
USDA left the rest of the 2020/21 U.S. corn balance sheet unchanged, as expected, with corn for ethanol usage at 4.950 billion bushels and feed/residual usage at 5.650 billion. With the only revision being the 50 million bushel increase in exports, USDA lowered U.S. corn ending stocks by only 50 million to 1.502 billion vs the average trade estimate of 1.382 billion bushels reflecting an “expected†stocks cut of 170 million bushels from last month. The market was largely dialed in on an expected 150-200 million bushel increase in exports today, rightfully so in our opinion, but it wasn’t to be – for now. We’re maintaining our 2020/21 U.S. corn ending stocks estimate at 1.227 billion bushels, with exports at 2.800 billion, feed/residual at 5.700 billion and corn for ethanol at 4.975 billion. With prices expected to remain at notably elevated levels well into the summer, we’re leaning a bit lower on feed and ethanol usage, but potentially higher on exports depending on how China handles their massive 12-15 MMT in outstanding U.S. corn purchases currently on the books. There is always the risk of cancellations and/or rolling forward to new crop with Chinese purchases so it will be a constant adjusting act in the month ahead. We’ll also be keeping a close eye on ethanol exports and potential positive impact on ethanol production needs if the rumored Chinese purchases of U.S. ethanol play out. For now, though, the large stocks would help buffer an increase in exports, but this situation is likely to be fluid in the months ahead and warranting of attention.
Adding to the curiousness of the USDA’s limited increase in U.S. corn exports was their 6.5 MMT increase in Chinese corn imports to 24.0 MMT this month, all while leaving Argentine, Ukraine and Brazilian exports completely unchanged. The USDA lowered EU corn imports by 2.5 MMT from last month to 15.5 MMT, which partially offset the 6.5 MMT increase in China, but with some creative number play across the rest of the global balance sheet, USDA managed to reflect total world corn imports up only 2.7 MMT from last month, while total exports rose 2.1 MMT from last month – 1.2 MMT accounted for by the U.S. The USDA raised 2020/21 Chinese corn ending stocks by 4.5 MMT this month to 196.2 MMT, now reflecting only a minor decline from last year’s 200.5 MMT.
USDA pulled the “wait and see†card on the South American crops, as well, leaving Brazil at 109.0 MMT (108.3 MMT average estimate) and Argentina at 47.5 MMT (46.8 MMT average estimate).
The next focal point for the markets will be next week’s USDA Ag Outlook Forum, set for Thursday and Friday, Feb 18-19. Despite this year’s event being fully virtual, we anticipate the same structure as in the past regarding the various data releases. Typically, Thursday morning’s info provides USDA’s new crop acreage ideas along with average farm price expectations for the coming year, while Friday morning’s releases include the full new crop balance sheet ideas.
Soybeans
USDA was equally limited in revisions to the U.S. soybean complex balance sheets this month, as well, but obviously being more limited in their options for soybeans than corn given the already historically low ending stocks projection in place. USDA bumped 2020/21 U.S. soybean exports higher by 20 million bushels to 2.250 billion, prompting a decline in ending stocks by the same amount to 120 million. This was exactly in line with market expectations with the average trade estimate sitting at 121 million. Without pushing ending stocks to historically minimal levels, their hands were a bit tied this month despite crush demand through the first four months of the year warranting a higher estimate than USDA’s 2.200 billion bushel projection, as well. However, high prices are expected to ration crush demand as the year progresses, particularly if the large expected South American crops verify, so USDA holding the line for now was not all that unexpected.
With the minor uptick in the U.S. soybean export projection, late January total commitments of 2.155 billion bushels reflect nearly 96% of the USDA’s annual estimate, historically high but not unprecedented as 2012/13 and 2013/14, saw sales on the books at this point ultimately reflect 94.5% and 96.2% of annual exports, respectively. If exports are to prove in line with current projections, a virtual halt to sales will be needed during the 2nd half of the marketing year as was the case in both of those years, averaging a mere 3.7 million bushels/week during Feb-Aug.
We’re maintaining our 2020/21 U.S. soybean ending stocks estimate at 120 million bushels, but with slightly higher crush and import ideas than USDA, but again being largely tied by the minimal ending stocks projections already in place. U.S. soybean export demand is expected to decline sharply and quickly once new crop South American supplies begin to make their way to market, but until then, a continued strong U.S. export program will be psychologically supportive. It’s going to be walking a fine line during the second half of the marketing year with every bushel being important to the bottom line of the balance sheet, while needing to maintain strong new crop price signals into the U.S. planting season to attract as much acreage as possible for 2021/22.
For the products, USDA revisions were very limited, as well, with only a 100 million pound increase in soybean oil for biodiesel production to 8.300 billion pounds, resulting in total domestic usage being raised 100 million pounds, as well. The net result was a 100 million pound reduction in 2020/21 ending stocks to 1.714 billion pounds, reflecting a modest decline from last year’s 1.849 billion and the lowest since 2016/17. USDA left the U.S. soybean meal balance sheet unchanged this month across the board.
As previously mentioned, USDA left their Brazilian and Argentine production and export estimates unchanged this month, as well as leaving Chinese soybean imports unchanged, as well, at 100 MMT. Average trade estimates implied ideas for minor reductions in the South American crop estimates.
Next week’s USDA Ag Outlook Forum numbers will make for interesting viewing. Remember in the USDA’s early baseline projections released in early November, they indicated ideas for new crop soybean acreage at 89.0 million acres vs this year’s 83.1 million, with corn at 90.0 million vs this year’s 90.8 million. With the rally in prices, ideas for new crop acreage continue to rise, with expectations for every possible acre to find a way into production this spring.
Wheat
USDA left the 2020/21 U.S. all wheat balance sheet completely unchanged, as expected, while making modest by-class export revisions as a result of recent Chinese purchases. USDA lowered hard red winter wheat exports by 25 million bushels this month, being offset by a 15 million bushel increase in hard red spring and 10 million bushel increase in white. China has bought 633k tonnes of HRS and 769k tonnes of white wheat so far, with 244k tonnes and 719k tonnes, respectively, still unshipped. On the other hand, China’s purchases of 1.126 MMT of HRW and 174k tonnes of SRW are fully shipped. Based on the level of by-class sales currently on the books relative to the USDA’s export projections, it appears their HRW export estimate may still be a bit on the high side, while white wheat looks a bit low. The HRS and SRW sales paces so far are near enough the USDA’s projections to call it even.
Today’s unchanged 2020/21 U.S. wheat ending stocks estimate of 836 million bushels was expected as indicated by the 832 million bushel average trade estimate. The U.S. balance sheet can be characterized as “middle of the road†in historical terms – simply uninspiring on either side of the argument, particularly with export demand running at mundane/routine levels. Ho hum goes the U.S. wheat situation for now. We’re maintaining our U.S. wheat ending stocks estimate at 812 million bushels, assuming marginally higher exports and feed/residual usage than USDA, with another modest decline in stocks for 2021/22 to around 750 million bushels, which is still nothing to get excited about in the big picture.
Globally, the majority of “closely watched†numbers were largely unchanged this month, as well, with USDA leaving export projections for Russia, Ukraine, Canada and Australia untouched, while Argentina was tweaked 500k tonnes lower and EU 500k tonnes higher. The only global revision of interest/note was a sizable 5 MMT increase in estimated Chinese wheat feeding from last month to 30.0 MMT and compares to 19.0 MMT last year. USDA also raised Chinese wheat imports by 1 MMT to 10.0 MMT, but with the increase in feed usage, their ending stocks were lowered by 4.0 MMT to 154.9 MMT, but still up modestly from last year’s 151.7 MMT. USDA also made a solid 3.5 MMT upward revision in Indian domestic wheat usage (non-feed), with their ending stocks declining by 3.8 MMT from last month. Combined with the Chinese revisions, USDA lowered 2020/21 world wheat ending stocks by 9.0 MMT from last month to 304.2 MMT, which still remain up from last year’s 300.1 MMT. World wheat stocks excluding China were lowered to 149.3 MMT from 154.3 MMT last month, but still up slightly from last year’s 148.4 MMT.
USDA Monthly Supply/Demand Balance Sheet Revisions
