USDA Cuts Corn/Soy Yields, Global Stocks Declining
USDA’s September Crop Production report confirmed smaller corn and soybean crops for the U.S., and stocks for both balance sheets were cut for the 2020/21 crop year. USDA held China’s corn and soybean import outlooks but raised the wheat import forecast. Global corn and soybean stocks were cut, while wheat stocks were raised.
2019/20: Exports were cut 30 MBU to 1,765 MBU thanks to a poor finish to the crop year. Ending stocks were raised to 2,253 MBU.
2020/21: USDA cut yield, which was expected, and cut harvested area by 500,000 acres. Production was cut 378 MBU versus August. Lots of changes were made to the demand side with the net result being a loss of 100 MBU in total use. Feed and residual was cut 100 MBU, ethanol use was cut 100 MBU, but exports were raised 100 MBU. Ending stocks are now forecast at 2,503 million bushels. The market will focus on export prospects in the coming months. USDA held China’s imports at 7 MT despite the uptick in U.S. commitments. USDA cut Ukraine and EU production but raised Brazil.
2019/20: USDA bumped crush up by 10 MBU and exports up by 30 MBU. Ending stocks were cut versus last month to 575 MBU.
2020/21: The yield was cut, as expected. Our outlook is smaller, so we lean toward a tighter carryout. USDA made no other major changes to the balance sheet. Exports were held at 2,125 million bushels, but that is a strong program. USDA held China’s imports at 99 million tonnes, which may have surprised some in the market. Brazil’s production was raised 2 million tonnes, nearly offsetting the cut to the U.S. total, but USDA held Argentina’s production. Planting season is starting for Brazil. The U.S. soybean balance sheet will be a demand story moving forward as China continues to buy U.S. beans and Brazil runs tight on domestic supplies.
No major changes were made to the all-wheat balance sheet, and only minor adjustments were made to the by-class balance sheets. The good news is that USDA raised global production but held U.S. exports at 975 MBU. We also see exports at that level for now, but the risk is that we lose some share. USDA unsurprisingly raised Australia and Canada production but actually held Russia’s crop at 78 MMT and also raised the EU crop marginally. While USDA held China’s corn and soybean import forecasts, the agency raised wheat imports to 7 MMT, up 1 MMT. The U.S. will face stern competition moving forward if the Australian and Argentine crops hit USDA’s production forecasts. It is hard to find a bullish argument even if demand picks up.
FBN's take on what it means for the farmer
The reports were overall supportive from a demand and supply side. Tighter corn and soybean supplies for the world are positives for the U.S. with the U.S. ready to fill in any export demand that South America cannot meet. For wheat, it is harder to get excited given the supply outlook from competitors.
Want access to more insights like this?
This article is excerpted from our Market Intelligence newsletter, delivered weekly toFBN Market Advisory members. With FBN Market Advisory, you'll receive truly personalized tools and reports to support your grain marketing efforts. Get access to market news, straightforward marketing recommendations, basis trend insights and weather reports—all relevant to your operation and geographic location.
Copyright © 2020 FBN BR LLC. All rights Reserved. FBN Market Intelligence is distributed by FBN BR LLC. Contact 877-472-4607 for more information. For the purposes of quality assurance and compliance, phone calls to and from FBN BR LLC may be recorded.
We do not guarantee customers will receive specific benefits or value from participating in FBN BR LLC; results will vary. The data in this article is being supplied as a courtesy by FBN BR LLC. The risk of trading futures and options can be substantial and may not be suitable for all investors. All information, publications, and reports, including this specific material, used and distributed by FBN BR LLC shall be construed as a solicitation. FBN BR LLC does not distribute research reports, employ research analysts, or maintain a research department as defined in CFTC Regulation 1.71. This article contains information obtained from sources believed to be reliable, but its accuracy is not guaranteed by FBN BR LLC. Past performance is not necessarily indicative of future results.
Disclaimer: Futures and Option trading involves substantial risk, and may not be suitable for everyone. Trading should only be done with true risk capital. Past performance, either actual or hypothetical, is not necessarily indicative of future results.