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-U.S. October soybean crush as expected – record high
-U.S. October soybean oil stocks higher than expected-U.S. October corn for ethanol usage a bit higher than anticipated

USDA reported U.S. soybean crush in October was 196.6 million bushels, exactly in line with average market expectations, up significantly in seasonal fashion from September crush of 171.1 million bushels and 5.0% above last year’s Oct crush of 187.2 million bushels. Moreover, Oct crush set a new all-time monthly record in surpassing March 2020’s 192.2 million bushels. Through the first two months of 2020/21, cumulative crush of 367.6 million bushels is up 18.1 million bushels (5.2%) from last year’s 349.5 million, while the USDA’s annual crush estimate of 2.180 billion bushels reflects a 15 million bushel projected increase from last year in total. Nationwide October crush was 6.1% above NOPA-member crush, mostly in line with the 5.9% and 5.8% differences seen in Sept and Aug, respectively, but less than last year’s October difference of 6.7%. Based on the USDA’s annual crush estimate, Dec-Aug crush would need to total 1.812 billion bushels, essentially unchanged from last year’s 1.815 billion, obviously reflecting the need for a slowdown from the record pace to start the year.

USDA reported 2.282 billion pounds of soybean oil was produced in October vs 1.968 billion in September and 2.150 billion pounds last year, with the October soybean oil yield moving up sharply to 11.61 pounds/bushel from 11.50 in September and notably above last year’s 11.49 October yield. With October being the first month in which new crop soybean supplies largely work their way into crush facilities, it is apparent oil yields from this year’s crop are solidly better than those of last year’s. As we’ve shown in past years, the relationship between the October soybean oil yield and the marketing year average yield is quite strong – at least enough so to provide a solid ballpark idea of annual average yield prospects early in the game. This relationship tightens up even more so when looking at the average Oct-Nov yield vs annual yields so we will update this view again when next month’s data is available. The following chart shows this relationship, with the long-term correlation shown by the black trendline, but more importantly, the recent-year correlation is shown with the red trendline for the last three years. For the statistics lovers out there, the r-squared value of the long-term relationship (2000-2019) between the October soybean oil yield and the annual yield is a very respectable .839, but over the last three years, the r-squared jumps to a near-perfect .9969. Based on this, a 2020/21 U.S. average soybean oil yield of around 11.59-11.60 pounds/bushel would be implied, which is right in line with the USDA’s current balance sheet assumption of 11.59 lbs/bu.

USDA reported end October U.S. soybean oil stocks were 1.964 billion pounds, up solidly from 1.849 billion in September, notably above last year’s 1.821 billion pounds and were the 2nd highest October stocks of the last 8 years. Moreover, Oct soybean oil stocks were solidly above average market expectations of 1.912 billion pounds and above the entire range of market ideas of 1.887-1.950 billion pounds. Nationwide soybean oil stocks were 32.0% larger than NOPA-member stocks for the month of 1.487 billion pounds, solidly above the 27.9-29.0% differences the previous two months and was actually the largest percentage difference between the two since July 2019. Based on estimated October exports, domestic soybean oil usage for the month was implied up nearly 10% from last year after July-Sept domestic usage was up a mere 1.5% year-over-year. However, monthly deviations in implied domestic usage are notorious as evidenced by the range over the last six months from a 12% decline to an 18% increase, so we would not be surprised to see some “evening out” in the months ahead. U.S. soybean meal production in October was 4.616 million tons vs 4.009 million in September and 4.382 million tons last year. Based on estimated exports, October soybean meal domestic usage was implied up 7-8% from last year vs July-Sept domestic usage being up 1%, but again not too much should be read into that as month-to-month deviations can be substantial.

USDA reported 432.7 million bushels of corn was used for ethanol production in October, up from 401.5 million in September, but still down a minor 6.4 million bushels from last year’s 439.1 million bushels. The minor shortfall followed September’s 4.2 million bushel year-over-year decline, but reflected a substantial improvement from the 44 million bushel and 26 million bushel declines seen in August and July, respectively, and an impressive bounce back from the monthly demand losses of 77 million, 160 million and 196 million bushels posted in June, May and April. Based on estimated monthly ethanol production, as the EIA’s official data for October won’t be available for nearly another month, it appears the ethanol/corn yield took a bit of a hit to around 2.85 gallons/bushel in October from just shy of 2.90 in September and August. This may have been the main factor contributing to corn for ethanol production in October proving modestly above previous expectations by around 10 million bushels. With corn for ethanol usage through the first two months of 2020/21 of 834 million bushels, down 11 million bushels from last year, Nov-Aug usage will need to total 4.216 billion bushels to meet the USDA’s 5.050 billion bushel annual target, up 5.2% from last year’s 4.007 billion bushels during the period. Accordingly, taking into account early assumptions of the ethanol/corn yield this year and the amount of sorghum potentially being used, or not used, in ethanol production, we see ethanol production needing to run somewhere around 5-6% above year ago levels, on average, during Dec-Aug in order to reach the USDA’s corn for ethanol usage estimate. Over the last five weeks, ethanol production has averaged 6.0% below last year, but the year-over-year comparison will obviously get a substantial boost come March/April when comparisons when the COVID-impacted shock come into play. USDA again did not provide sorghum for ethanol usage data for October as the numbers were too small to avoid disclosing data for individual operations, which in the case of sorghum typically implies usage was less than 1.5 million bushels for the month. USDA reported 1.801 million tons of DDGS were produced in October vs 1.736 million in September and 1.832 million tons last year, putting 2020 calendar year to date production at 16.53 million tons vs 18.75 million last year.

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