June 28, 2021
This Wednesday at 11 a.m. CDT, the USDA will release both its June 1 Grain Stocks Report as well as the June Acreage Report. The first will provide an assessment of just how much corn and soybeans are available to get the trade through the end of the marketing year, ahead of the upcoming harvest.
In the case of soybeans, this will be particularly important as market observers will recall, the June 10 USDA Supply and Demand report (WASDE) indicated that estimated 20-21 carry-out of 135 mbu translated into the smallest expected stocks-to-use ratio on record (for that month’s forecast) of 3.0%, below 2014’s prior tightest-ever figure of 3.7%.
Trade estimates for Wednesday’s soybeans stocks range from a low of 696 million bushels (mbu) to a high of 952 with the average at 787.
So, how would that number shape up versus expected June through August demand?
Even though this summer’s export program is expected to be significantly smaller than last year’s June-August total of 321 million, because of Brazil’s record soybean crop AND what appears to be slowing Chinese import demand, U.S. supplies will likely still be very tight. Crush during the summer months is expected to be down only slightly from the 536 mbu used last year as renewable biodiesel demand has boosted soybean oil prices to multi-year highs, allowing processors to earn record crush margins.
Meal exports pick up
Interestingly enough, export soybean meal demand has been picking up of late with weekly sales during the past month the 2nd highest seasonally in more than 20 years. Using the trade average stock level estimate of 787 mbu and subtracting out, say, 530 for crush and another 100 for exports, puts September 1 stocks between 150-160 million. Seed use for soybeans planted in June (the USDA reported 15% of the crop still remained to be planted as of June 1) as well as the amount of double crop beans this summer and the ever-unpredictable “residual” use category will be keys as well.
As for corn, the trade expects June 1 stocks to come in at 4.14 bbu with a range from 3.927 to a high of 4.55 billion. With record March-May exports approaching nearly 1.05 bbu and a recovery in ethanol demand on the order of 25% from last year’s Covid-reduced levels, feed/residual use during the third quarter will be closely observed along with wheat feeding in both the 3rd and 4th quarters.
Should the June 1 corn stocks total come in near the trade average, year-end corn inventories are expected to be around 1 billion bushels, which would be “reasonably” comfortable if the summer growing season results in corn yields within 3-4 bushels per acre or so of the USDA’s 179.5 bpa yield assumption.
What about planted acres?
But the real focus in Wednesday’s report will probably be what the USDA expects for planted acres of both corn and soybeans. The trade range on the former is from 92.0-95.8 million acres, with an average of 92.3. Soybeans are pegged between 87.9 and 90.4 with the average just a shade below 90 million. The trade average on corn is 2+million MORE than what the March 31st Plantings Intentions revealed, and the soybean estimate is 2.3 million GREATER.
Both crops are aggressively competing for acres given the price incentives the market has been offering since late winter. And there is some argument that with fairly minimal prevent plantings this spring, both crops are likely to report higher numbers than seen in the March Intentions report.
How markets react
The two graphs below indicate how trade forecasts for corn and soybean acreage in Wednesday’s report have measured up to the numbers reported by USDA, along with the subsequent market response. The blue vertical bars show the difference between USDA’s acre and the average Trade estimate with positive numbers indicating a higher than expected figure and a negative one, smaller than expected planted acres. The red line in each graph shows by how much December Corn futures (CZ) and November Soybean futures (SX) changed on the day of the report versus the previous close.
It’s probably a safe bet we can expect another report day of market volatility on Wednesday.
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