-December soybean crush in line with expectations
-December soybean oil stocks modestly lower than expected, but 8-year high-December corn for ethanol usage holds no surprises
USDA reported U.S. soybean crush in December was 193.8 million bushels, exactly in line with average market expectations of 193.9 million (192.0-195.0 million range of ideas), easily reflecting another same-month record in exceeding last year’s 184.7 million and rising slightly from 191.0 million in November. Through the first four months of 2020/21, cumulative crush of 752.4 million bushels is up an impressive 43.5 million bushels (6.1%) from last year’s 708.9 million, already exceeding the USDA’s estimated annual 35 million bushel increase from last year, based on their 2.200 billion bushel annual projection vs last year’s 2.165 billion. Accordingly, and needless to say, if annual crush is going to end up anywhere near the USDA’s projection, a considerable demand rationing job will need to be done, with Jan-Aug crush needing to total 1.448 billion bushels vs last year’s 1.456 billion. While the year-over-year difference is not all that great, the “needed” crush rate represents a notable slow-down from the torrid pace through the first four months of 2020/21. USDA reported U.S. soybean oil production in December was 2.232 billion pounds vs 2.207 billion in November and 2.111 billion last year, with the average soybean oil yield slipping in seasonal fashion to 11.52 pounds/bushels from 11.55 in November, but continuing to run solidly above last year’s 11.43 pounds/bushel in December. USDA reported end December U.S. soybean oil stocks were 2.219 billion pounds, up modestly from 2.118 billion in November and above last year’s Dec stocks of 2.134 billion pounds, but were slightly less than average market expectations of 2.254 billion pounds (2.200-2.358 billion range of ideas). However, end Dec soybean oil stocks were easily the highest in eight years as seen in the 2nd chart below. Based on estimated exports, we pencil December domestic soybean oil usage up 14-15% from last year, continuing the solid start to 2020/21 in which October and November were up 7% and 11%, respectively. USDA reported December soybean meal/hull production was 4.569 million tons vs 4.516 million in November and 4.338 million tons last year, putting Oct-Dec production at 13.701 million tons vs 12.831 million last year. Based on estimated exports, December domestic soybean meal usage was implied near unchanged from last year, but 1st quarter (Oct-Dec) total domestic usage is implied up roughly 6% on the year so far.
USDA reported December corn for ethanol usage was 430.4 million bushels, nearly identical to 431.7 million in November, but reflecting an accelerating demand loss relative to last year’s December usage of 479.2 million bushels. After September and October usage was only 4 million bushels and 5 million bushels, respectively, below year ago levels, the December 49 million bushel shortfall followed November’s 25 million bushel deficit, with 2020/21 marketing year to date corn for ethanol usage of 1.698 billion bushels now down 83 million bushels from last year’s 1.781 billion. In a “normal” situation, with USDA currently estimating annual corn for ethanol usage to rise 100 million bushels from last year, a clear need for a reduction from USDA would be implied by the recent slowdown. However, as we approach last year’s massive COVID demand hit, in which corn for ethanol demand lost 464 million bushels year-over-year during March-June, we do not see an immediate need for USDA to lower their estimate, as Jan-Aug total corn for ethanol usage needs to total 3.252 billion bushels, only 181 million bushels larger than last year’s disastrous 3.071 billion in order to reach 4.950 billion bushels annually. Based on this month’s update, we estimate U.S. ethanol production will need to average roughly 932k barrels/day (274 million gallons/week) for the rest of 2020/21, which is comparable to average production over the most-recent five weeks of 938k bpd. Last year, Feb-Aug ethanol production ran at a roughly 862k bpd average rate. Ethanol/corn yields continue to run strongly, implied at roughly 2.91 gallons/bushel in December vs 2.90 in November and 2.89 through the first four months of 2020/21. USDA reported 1.784 million tons of DDGS were produced in December vs 1.794 million in November and 1.908 million last year.