This post contains tables summarizing the historical differences between the USDA’s grain/oilseed ending stocks estimates released in the February Ag Outlook Conference vs actual final ending stocks since 2005/06, as well as a look at how the USDA’s February yield assumptions compare to the first official balance sheet estimates in the May WASDE report and to final yields. We also included the acreage summaries initially posted yesterday, as well as the average farm price estimates comparisons to actual.
A few quick items of note…
U.S. corn ending stocks have proven lower than the USDA’s February estimates in six of the last nine years, with this year’s current 2020/21 ending stocks estimate a significant 1.135 billion bushels below the USDA’s February “starting point†last year given the developments of China’s massive buying. We feel corn acreage could prove a bit above the USDA’s current 92.0 million acre view, but demand will have to prove itself relative to the USDA’s 2.650 billion bushel new crop export projection as reaching that level will likely be predicated on another large Chinese import program. Even without a major weather problem detrimentally impacting acreage and/or yields, we feel 2021/22 U.S. corn ending stocks are likely to remain constructively tight, potentially around 1.5 billion bushels, a view shared by USDA with their initial view today of 1.552 billion. Something to keep in mind, though, is the fact that prior to the last two years’ troubled crops, the previous five years all saw the U.S. average corn yield prove higher than the USDA’s initial estimate in February, anywhere from 1.6-6.6 bushels/acre. Even a 2 bu/acre increase from today’s USDA estimate of 179.5 would add 170+ million bushels to the balance sheet, providing a bit more breathing room and/or room for demand to prove a bit higher without detrimentally impacting ending stocks. We’re using a starting point yield of 178.5 bushels/acre, slightly below USDA, but clearly feel yields could easily prove higher with favorable conditions this growing season.
U.S. soybean ending stocks have historically been heavily biased towards being lower than the USDA’s February estimates having been the case in 11 of the last 14 years. The USDA’s initial 90.0 million acre assumption for 2021/22 is in line with our current ideas, but even with a 7 million acre increase from last year, prospects for continued strong demand in the coming year leave new crop ending stocks still on the historically tight side, as we’re at 154 million bushels in our new crop balance sheet with USDA this morning penciling new crop ending stocks at 145 million bushels. There may be room to add some acreage relative to USDA’s Outlook Forum assumptions as their 8 major crop total area assumption of 254 million acres is still a bit below 2012-2014’s 255.9-257.9 million, but does reflect total acres more in line with 2015-2018’s 252.1-253.9 million. The market has a job to do if additional acres are going to move back into production beyond USDA’s ideas this week, but with current prices, and insurance guarantees, the highest in years, there should be plenty of incentive to farmers to push acreage levels to the max – weather willing. Additionally, soybean yields have consistently proven better than the USDA’s February assumption, being the case in six of the last seven years, with only 2019/20’s very-troubled crop falling short. While last year’s yield was only 0.4 bushels/acre above the USDA’s February estimate, an achievement nonetheless with last summer’s issues, soybean yields averaged 2.6 bushels/acre above the February assumption in the five years from 2014-2018. Adding 2 bushels/acre to today’s 50.8 bu/acre estimate by USDA could add 180+ million bushels to the balance sheet, providing quite a bit of breathing room.
The 2021/22 U.S. wheat balance sheet appears set to see another year of modestly tightening stocks. While still not considered to be an outright bullish structure, ending stocks continue to be whittled away, projected to decline for the 5th consecutive year and potentially near/below 2014/15’s 752 million bushels – the lowest in seven years. The USDA pegged new crop ending stocks today at 698 million bushels, while we’re currently at 740 million in our balance sheet. However, the overall demand situation simply remains unexciting, with U.S. exports stuck in a rut of 950 million-1.0 billion bushels in recent years, as major competing exporters “play tag†with who shines and who struggles from year to year. With the U.S. balance sheet tightening up, if several major exporters experience production issues with the 2021/22 crop, the situation for the U.S. could get much more interesting, but better demand for U.S. wheat than experienced in recent years, or a notable U.S. crop problem, likely will necessary to turn wheat into a truly bullish fundamental situation for 2021/22. We would note, though, U.S. wheat ending stocks have proven to be larger than the USDA’s initial view in February of each of the last seven years.
U.S. soybean oil ending stocks have been a mixed bag over the last nine years with five years proving lower than the USDA’s February ideas and four years higher. It is interesting to note, though, that U.S. soybean oil ending stocks have deviated by an average of 15.9% from the USDA’s February estimate over the last nine years, ranging from 32% below to 17% above. A 15.9% deviation from today’s estimate of 1.614 billion pounds would reflect a range of stocks ideas of 1.357-1.871 billion pounds.
The USDA’s 2021/22 Grain/Oilseed Outlook Conference full report and balance sheet can be found in our Market Insights post at https://portal.rjobrien.com/MarketInsights/Blog/Read/43001.
