Good Afternoon! On this particular version of E-corn-omics, we’re going to take a deep dive into the outcomes and implications of at the moment’s Crop Manufacturing and World Agricultural Provide and Demand Estimates studies launched from USDA.
For extra report highlights, try our real-time report coverage. Within the meantime, listed below are the highest elements I saved my eye on it at the moment’s studies.
Corn provides shrink to tightest degree in eight years
All eyes had been on USDA’s newest Crop Manufacturing report and market watchers weren’t upset this morning. USDA trimmed 2021 corn yields extra than markets had been anticipating in at the moment’s report with the most recent estimate coming in at 174.6 bushels per acre (bpa) – 1.1 bpa decrease than the bottom commerce guess.
Decrease acres planted in high producers Iowa, Illinois, and Nebraska this yr, paired with yield losses from Minnesota, the Dakotas, and Wisconsin led the 2021 yield estimate of 174.6 bpa to tie with 2016 because the third largest yield on document.
USDA’s new 2021 corn manufacturing forecasts of 14.75 billion bushels would be the second largest U.S. corn crop in historical past, behind 2016’s document haul of 15.15 billion bushels. Though this yr’s crop will high final yr’s by 568 million bushels, the 2021 crop will probably be 415 bushels smaller than earlier 2021 estimates, which is able to preserve provides tight for one more advertising cycle.
Regardless of elevating 2020/21 ending shares on slowing previous crop corn export volumes and trimming 2021/22 feed and export volumes, USDA expects the smaller 2021 crop will tighten new crop ending shares to 1.24 billion bushels. At a stocks-to-use ratio of 8.5%, this yr’s crop will land because the fifth tightest on document over the previous 60 years.
That bodes very bullish for brand spanking new crop corn costs and may provide farmers some profitable pricing alternatives at harvest this yr.
Brazil’s safrinha struggles
Brazil’s corn crop was minimize 6.5% to three.43 billion bushels. A delayed begin to planting, drought, and frost all took a toll on Brazil’s safrinha crop, tightening international exportable provides via the remainder of the summer season and on into the brand new advertising yr.
That might put extra stress on U.S. corn exporters within the coming weeks as USDA shrinks Brazil’s 2020/21 corn estimate determine by 197 million bushels to 906 million bushels – it’s smallest export quantity since 2015/16.
Brazil is slated to be the world’s third largest exporter this yr, following the U.S. and Argentina. It’s historically the second largest corn exporter behind the U.S.
The smaller exportable shares may level to extra export alternatives for U.S. corn growers this fall. U.S. corn shipments to Central America and Southeast Asia have eased over the previous six weeks as patrons await freshly harvested 2021 corn provides. It may create profitable foundation alternatives at export and barge services within the coming weeks.
Hope stays for South America’s crops subsequent yr. Regardless of the drought, USDA left subsequent yr’s manufacturing estimates for Brazil and Argentina unchanged at 4.65 billion and a pair of.01 billion bushels, respectively. However a second straight La Niña climate system showing within the Western Hemisphere this fall may exacerbate drought circumstances and additional tighten international corn and soy provides.
Soybeans shares tighten again to 2020 ranges
USDA trimmed soybean shares solely barely – down 0.8 bpa to 50.0 bpa, nicely inside commerce estimates. The brand new yield estimate is prone to be the fourth highest on document after a turbulent rising season saved the highest finish of yields away from producers.
Regardless of larger 2021 planted acreage, drought within the Higher Midwest minimize yield forecasts in key producers Minnesota, North Dakota, and South Dakota, in response to USDA-NASS knowledge.
That locations 2021 soy manufacturing estimates at 4.34 billion bushels, down 66 million bushels from earlier manufacturing estimates in an period of already tight soybean provides. However that quantity is prone to be the third largest soybean crop the U.S. has ever harvested, following 2018 (4.43B bu.) and 2017 (4.41B bu.).
Even with smaller 2020/21 export and crush utilization charges, USDA doesn’t anticipate that the 2021 crop will fulfill rising home and worldwide demand for U.S. soybeans. USDA minimize 40 million bushels of 2021/22 utilization charges on the smaller crop, preserving ending shares at a paltry 156 million bushels.
That signifies that the brand new ending shares to make use of ratio for 2021/22 will probably stay similar to that of 2020/21 at a meager 3.5%.
International wheat provides shrink
Wheat isn’t normally a big beneficiary of latest USDA updates. Actually, wheat costs sometimes observe these of corn within the aftermath of WASDE studies. However prior to now month, wheat has stepped out onto its personal stage as international manufacturing shortfalls push costs larger.
New crop manufacturing estimates for high exporters Russia, the U.S., and Canada had been slashed a staggering complete of 784 million bushels. Within the U.S., smaller spring wheat, white wheat, and durum crops resulted within the smaller 2021 manufacturing estimate after drought within the Pacific Northwest and Northern Plains decimated farmers’ hopes for higher yields and export alternatives this yr.
For the primary time in over a yr, USDA minimize international wheat consumption charges for livestock as hovering wheat costs make corn a extra enticing and reasonably priced choice for livestock feeders’ rations across the globe. International previous crop wheat feed estimates had been trimmed 4 million bushels, whereas 2021/22 projections had been slashed 117 million bushels as exportable provides world wide start to dry up.
Chicago and Kansas Metropolis futures costs rallied $0.30-$0.34/bushel larger on the prospect whereas Minneapolis futures soared $0.16-$0.17/bushel larger. For growers who had been in a position to salvage wheat crops this yr, that presents a really profitable pricing alternative for any bushels that will stay unpriced.
And for growers seeking to 2022, aggressive wheat costs may steal all the time extra acreage from corn and soybeans as growers start to make winter wheat – and different crop varieties – planting choices about 2022 within the coming weeks.
Chinese language soy imports trimmed
USDA trimmed previous crop (37M bu.) and new crop (37M bu.) soybean imports to China as tightening crush margins restrict processing demand for the oilseed. China’s latest coverage steerage recommends farmers use alternate protein feed sources to substitute for dearer soy rations.
With that in thoughts, USDA expects China will import 4 million extra bushels of wheat within the coming yr. China’s complete corn, soybean, and wheat imports are expected to complete 5.1 billion bushels, a 36% enhance from 2017’s import volumes for the three crops.
White wheat growers within the U.S. Pacific Northwest profited off a 33% annual enhance in white wheat exports final yr on unprecedented Chinese language demand. Over 11% of 2020/21 U.S. wheat was shipped to China, in comparison with solely 2% the yr prior.
However Chinese language and Southeast Asian wheat shipments have been sluggish out of the gate throughout the 2021/22 advertising yr, so it’s not but clear if U.S. wheat growers will profit from USDA’s uptick in Chinese language wheat imports.
With U.S. soybean provides remaining at quick volumes, much less Chinese language demand is probably not as bearish as beforehand thought. If China continues ahead with much less soy processing for its livestock and poultry rations, corn and wheat stand to lose. However as China’s hog herd returns to full power following the 2018 African swine fever (ASF) outbreak, it’s prone to proceed being a big shopper of worldwide grains so long as provides can be found.
For U.S. farmers, that will make all of the distinction in sustaining a worthwhile outlook heading into 2022.