By Doug Tenney, Leist Mercantile
Much is expected with this report. Today’s report will now add in crop year 2021-2022 supply and demand tables. For decades going back to the 1970’s, the May report publishes the first supply and demand tables for new crop grains.
Shortly after the report was released, new corn was 8 cents, new soybeans up cents, and wheat down 7 cents. Just before the report release, new corn was down 5 cents, new soybeans were up 12 cents, and wheat down 4 cents.
New crop U.S. corn and soybean ending stocks will be closely watched. Following the March 31 USDA Prospective Plantings Report, numerous analysts suggested record corn and soybean yields would be needed ALONG with perfect weather to meet world grain demands. For the first time in history, U.S. ending stocks for both old and new soybeans are already considered “tight.”
The first “high wire act” is where USDA has been for months in particular for old crop U.S. corn exports to China. The trade is expecting much of the old crop 510 million bushels unshipped purchase at the end of April to actually be shipped by Aug. 31. On the other hand, USDA has been expecting those bushels to be rolled into new crop delivery.
USDA has a second “high wire act,” to perform. Factoring in current soybean demand, those US new crop ending stocks are easily below 75 million bushels. Don’t forget to add in the potential for additional U.S. soybeans getting crushed to meet jet fuel biodiesel demands that are expected later this year.
New crop 2021-2022 US soybean ending stocks were estimated to be 140 million bushels and new crop 2021-2022 U.S. corn ending stocks were estimated at 1.507 billion bushels.
Corn 2020-2021 ending stocks were 1.257 billion bushels, last month was 1.352 billion bushels. Soybean 2020-2021 ending stocks were 120 million bushels, last month was 120 million bushels. Wheat 2020-2021 ending stocks were 872 million bushels, last month was 852 million bushels.
The average trade estimate for U.S. old crop grains ending stocks were: corn 1.275 billion bushels, soybeans 117 million bushels, and wheat 846 million bushels.
Brazil corn production was 102 million tons, last month was 109 million tons. Brazil soybean production was 136 million tons, last month was 136 million tons. Argentina soybean production was 47 million tons, last month was 47 million tons.
A plethora of higher price activity has taken place since the April 9 WASDE Report. Multiple CBOT contracts have made numerous and frequent new contract highs in the past month. Settlements that USDA report day: July 2021 corn $5.62 ¾; December 2021 CBOT corn $4.96 ½; July 2021 CBOT soybeans $13.98 ¼; November 2021 CBOT soybeans $12.63 ¼. Compare those prices to last night: July 2021 corn $7.22 ¼; December 2021 corn $6.11 ¼; July 2021 soybeans $16.14 ¾; November 2021 soybeans $14.31 ½.
Tracking corn and soybeans imports into China along with their crush each month is now getting much more difficult. This week China’s COFEED (China’s equal to U.S. NASS), has suspended data release. China has been an active buyer of U.S. corn this month. Last week China purchased 5 million to 6 million tons of U.S. new crop corn. This week there have been additional purchases.
With the March 9 USDA report comments I wrote, “Demand rationing for soybeans and corn has been ‘THE’ function for the market to accomplish since last fall.” Those worlds still ring true today. Yesterday, these were the comments from one of the research reports we read daily: “The May WASDE Report should hammer home (their report added bolding) that US corn/soybean end stocks will be one of the tightest in years with China active in booking US new crop corn. Demand rationing thru price is needed in old and new crop futures.”
In spite of demand rationing not yet taking place, soybean crush margins continue to be very profitable, even when processors are paying dimes over the board. Illinois soybean processors have often been paying July soybeans plus 50 cents or more this month. Those strong basis levels will continue when profits are strong.
The Brazil drought is the worst in at least 50 years. It has robbed them of much needed world corn production to meet demands of end users across the globe. The Brazil second crop corn production is a disaster as corn pollination ends just after May 20. Temperatures this week have been in the 80s to lower 90s on bone dry soils. Last month USDA estimated Brazil corn production at 109 million tons. Recently, private analysts suggested that number could drop below 90 million tons.
Dry conditions continue to persist for the U.S. western Corn Belt, the Canadian prairies, and the Northern U.S. Plains. You may not think that North and South Dakota are important to watch, but their corn acres expanded drastically in the past decade. Those states can also provide a significant number of prevented planted acres and have done so in the past five years.
Take home point for the Dakotas. Watch the pasture conditions for excellent tells or hints into moisture levels. North Dakota pastures are rated among the worst in the 48 states detailed in the latest weekly crop progress report with the poor or very poor total at 75%.
Expect China to continue to buy U.S. new crop corn. The highest corn prices since 2012 do not scare China as their hog herd is recovering faster than expected from the African Swine Fever.
Unless this report is bearish or a wetter weather pattern develops in Brazil, the trend looks to remain up.