Supply increase weighs corn, soybean prices lower
USDA raised production estimates for 2021 corn and soybean crops in today’s World Agricultural Supply and Demand Estimates report, triggering losses in both crop complexes in the moments following the report’s release. The move grew both domestic and global ending stocks, while wheat supplies across the globe tightened more than previous trade guesses had expected.
“Chicago futures prices fell $0.15-$0.23/bushel lower in the moments following the WASDE report release,” says Farm Futures grain market analyst Jacqueline Holland. “USDA expects U.S. farmers will harvest an average yield of 51.5 bushels per acre, which came in on the high side of trade estimates prior to the report. That means the 2021 soybean crop will swell to 4.448 billion bushels, besting the 2018 crop (4.428B bu.) as the largest on record.”
For corn, USDA raised its 2021 production estimates slightly, moving the total to 15.019 billion bushels. That was in contrast with analyst estimates, which predicted the agency would shift the total slightly lower, to 14.973 billion bushels. USDA assumes a “marginal increase” in yield potential from September, with a new estimate of 176.5 bushels per acre.
“The revised 2021 corn crop of 15.019 billion bushels will remain the second largest crop in the record books, following only the 2016 crop of 15.148 billion bushels,” Holland says. “All told, USDA added 72 million bushels of corn to 2021/22 supplies.”
USDA also raised its export estimates by 25 million bushels and lowered its projection of feed and residual use by 50 million bushels. “With supply rising and use falling, corn ending stocks for 2021/22 are raised 92 million bushels,” the agency noted. The season-average price received by producers remained unchanged, at $5.45 per bushel.
“USDA took a giant bite out of 2020/21 feed and residual usage, slashing 128 million bushels of consumption from the category on a lower cattle herd,” Holland says. “An additional three million bushels were cut from ethanol volumes, which was not surprising considering the late season lag in ethanol production this summer. “
U.S. ending stocks increased from 1.408 billion bushels in September to 1.500 billion bushels. That was higher than the average trade guess of 1.432 billion bushels. World ending stocks for 2021/22 also increased, moving from 11.718 billion bushels a month ago up to 11.880 billion bushels.
“With a stocks-to-use ratio of 10.1%, up from 9.5% last month, 2021/22 ending stocks will now slip from the ninth tightest stockpile on record to the tenth tightest,” Holland says.
Meantime, Holland points out that USDA only increased China’s 2020/21 corn import target by 73 million bushels, bringing the total to 1.024 billion bushels. A USDA attaché post in Beijing last week recommended the figure be increased by 147 million bushels, so the lower old crop usage rate certainly played a role in keeping USDA from further raising 2021/22 corn import estimates for China.
“And markets truly caught a break with that one,” Holland says. “The same USDA attaché forecasts dropping 2021/22 Chinese corn imports by 33% from 2020/21 to 787 million bushels. But USDA left 2021/22 Chinese corn imports unchanged in today’s report, kicking the can of a potential market bloodbath down the road for another month.”
Holland also notes that USDA also made no revisions to China’s 2021 corn crop. Heavy rains this fall have triggered harvest delays and raised concerns about quality losses. But USDA kept China’s 2021 production target unchanged at 10.748 billion bushels, a 5% increase from the 2020 crop.
“China is not likely to import as much corn and wheat as it did in 2020/21,” Holland says. “Those purchases supported the price rallies of the past year. If its import forecasts further shrink in 2021/22, farmers can expect more bearish price…