USDA releases its Quarterly Grain Stocks report and 2021 Small Grains Manufacturing Abstract tomorrow. The Sept. 30 Grain Stocks report offers the newest take a look at USDA’s greatest estimates for previous crop supplies, thereby offering up to date utilization info for corn and soybeans for the 2020/21 advertising and marketing 12 months.
Final 12 months’s Sept. 30 report famously noticed smaller shares and better utilization charges, sparking rallies for corn and soybean futures costs that didn’t finish till this previous summer time. Will tomorrow’s studies kick off one other rally?
Listed below are a couple of components we’re preserving a watch on that can point out a bullish – or bearish – harvest season for U.S. farmers.
Corn utilization charges entice important market focus
As of the Sept. 10 World Agricultural Provide and Demand Estimate report, USDA initiatives 2020/21 ending corn inventory volumes at 1,186 million bushels. That complete widened as ethanol manufacturing charges and corn export charges slowed within the waning days of the 2020/21 advertising and marketing 12 months, which ended on Aug. 31.
Tomorrow’s corn shares quantity will likely be extremely dependent upon utilization charges over the previous three months. The common commerce guess means that about 30 million extra bushels of utilization wants to be factored into the newest WASDE ending shares worth however the place will that come from?
Extra clear steering on that doubtless gained’t come till the October 2021 WASDE report subsequent month. Dismal ethanol manufacturing charges during the last two months scale back the probability of ethanol utilization as a supply. 12 months-to-date cattle inventories are fractionally (1%) decrease than the identical volumes this time final 12 months.
USDA minimize 105 million bushels from 2020/21 corn export forecasts between July and September on lower-than-expected late season loading paces. Not coincidentally, U.S. corn exports to China tapered off in July and August because it harvested a bigger corn and wheat crop.
If commerce estimates are realized, 2020/21 ending shares at present on the fourth tightest stage (7.9% stocks-to-use ratio) on report would chop to the third tightest and compete with 2012 (7.4%) for the second tightest. That might create some profitable money alternatives for growers in areas the place harvest has not progressed as quickly.
Little change anticipated for soybeans
It’s no secret that soybean shares are tight – and can doubtless stay that method for a while. At a present stocks-to-use ratio of three.9%, 2020/21 U.S. soybean shares are at present on the second tightest on report, trailing solely 2013 (2.6%). However will that change tomorrow?
The commerce is skeptical it can. USDA’s present ending soy shares estimate of 175 million bushels is in keeping with market estimates for tomorrow’s report.
However keep in mind that since June, USDA has discovered 56 million extra bushels of previous crop soybeans within the type of unrealized crush manufacturing. A greater-than-expected August crush might draw down USDA’s determine tomorrow.
At any charge, with sturdy international soyoil demand and growing home biodiesel manufacturing capability, anticipate one other 12 months of tight supplies for the soybean market. Export markets are already heating up, particularly because the Gulf emerges from Hurricane Ida flooding and wind injury.
Within the occasion Chinese language demand lags on falling hog costs this 12 months, anticipate home crush processors to be the primary in line to snap up these new crop bushels.
It isn’t unprecedented that USDA will even make modifications to prior quarters’ inventory volumes. In the event you recall again to a 12 months in the past, the broad market rally was largely spurred by revised inventory readings of prior quarters, not solely due to the up to date third quarter shares readings.
USDA usually receives extra correct shares and utilization info after releasing the quarterly studies. This was particularly prevalent throughout peak pandemic months final 12 months. So don’t rule out extra modifications in tomorrow’s studies.
Wheat supplies shrink
As well as to utilization charges, USDA will launch up to date estimates on 2021 wheat manufacturing immediately. Historic droughts within the Northern Plains and Pacific Northwest (not to point out the Canadian prairies) stunted the white, spring, and durum wheat crops within the area.
Because of this, supplies are doubtless to tighten to a minimum of the tightest ranges since 2013/14. However of extra curiosity tomorrow could also be USDA’s utilization charges for the primary quarter of the 2021/22 advertising and marketing 12 months.
Peak export season is about to wrap up for the U.S. wheat market. Advertising and marketing 12 months to date wheat shipments are 18% decrease than the identical time a 12 months in the past. To make certain, the tight provide state of affairs and a rally within the greenback have made U.S. wheat a much less engaging possibility on the worldwide market. And Hurricane Ida injury on the Gulf of Mexico definitely put a dent in wheat loading paces throughout peak loading occasions.
However will smaller supplies offset decrease export loading paces? Right this moment’s report will present extra perception on that matter. Meals consumption charges for wheat within the U.S. have been elevated barely in final month’s WASDE report. And USDA’s high economists anticipate extra wheat to be fed to livestock within the U.S. this 12 months than final.
Corn will undisputedly seize the highest headlines in tomorrow’s report. However don’t sleep on wheat. The world’s high exporters are all underneath provide stress this 12 months, which might create some distinctive low season export alternatives for U.S. wheat.
Right this moment’s report might not have the firepower of final 12 months’s report, however it can definitely lay the groundwork for one more probably worthwhile 12 months for U.S. row crop producers.