While the May USDA World Agricultural Supply and Demand Estimates (WASDE) report featured little earth-shattering news for soybeans, it was new-crop December corn futures that reacted in a dramatically bearish fashion after new-crop stocks and demand estimates were more bearish than traders had anticipated. Overall, the crop report was fairly neutral for soybeans and bearish for both wheat and corn.
Corn ending stocks for the current 2020-21 crop year were dropped by 95 million bushels (mb) to 1.257 billion bushels (bb), about as expected. Old-crop corn exports were increased by 100 mb to 2.775 bb. The surprise came in the new-crop slot. Using the same acreage as in March planting intentions and a yield of 179.5 bushels per acre (bpa), corn production is estimated at 14.990 bb. That was just slightly below the average trade estimate of 15.07 bb and up 808 mb from last year. Inexplicably, USDA chose to drop U.S. corn exports by 325 mb from the revised old-crop number to just 2.450 bb. That comes despite the rapid decline of the Brazilian safrinha corn crop due to expanding drought. Ethanol usage was raised by 225 mb as the country recovers from COVID-19, but the fall in demand resulted in a new-crop carryout of 1.507 bb, or 153 mb higher than what was expected. The average farm price is projected to be $5.70 versus $4.35 this past year.
Globally, as mentioned, the Brazilian corn crop is wilting under current hot and dry conditions, and USDA chose to drop Brazilian corn production by 7 million metric tons (mmt) to 102 mmt (4.02 bb). That is still higher than most private analysts, leading traders to scratch their heads about dropping U.S. corn export demand in light of Brazil's reduced supplies and China's voracious appetite. Argentine corn production was left untouched at 47 mmt (1.85 bb). China corn imports were raised to 26 mmt for the 2020-21 year and kept at that same 26 mmt for 2021-22, further solidifying the demand base. World corn ending stocks rose by 8.8 mmt to a higher-than-expected 292.3 mmt (11.5 bb), with Argentine corn forecast 4 mmt higher at 51 mmt and Brazilian corn production forecast to be 16 mmt higher at 118 mmt (4.65 bb) -- all speculation at this point.
The WASDE report was considered bearish for corn, but it is new-crop December that's absorbing much of the selling. No doubt part of the reason is that, following the meteoric rise in corn prices, it is expected that ultimate corn acreage could be well above the March seeding intentions.
The soybean market was already 38 cents higher before the May WASDE report, and by the close had given up only some of those gains. Prior to the report, both July and November soybeans, along with July bean oil, scored new contract highs. The WASDE report held little fanfare for soybeans, as U.S. ending stocks were left unchanged again at 120 mb, with new crop pegged at a still-tight 140 mb -- just 8 mb above the average trade estimate. New-crop soy production was forecast at a lower-than-expected 4.405 bb, using the low 87.6 million-acre March planting intentions and a 50.8 bpa yield. Imports were left unchanged at 35 mb, while crush was raised by 35 mb and export demand was dropped 205 mb to just 2.075 bb. The average farm price is expected to rise to $13.85 from $11.25 in the current year.
On the world front, soybean ending stocks for 2020-21 came in just slightly lower than April, at 86.55 mmt (3.18 bb), while the 2021-22 world ending stocks number rose to 91.10 mmt (3.35 bb), slightly higher than the 88.8 mmt that the average trade estimate. Brazil soybeans were left unchanged at a record large 136 mmt for 2020-21, with Argentine soy production falling 500,000 mt to 47 mmt. For 2021-22, Argentina is expected to harvest 52 mmt (1.91 bb) and Brazil another new record-large 144 mmt (5.29 bb). That's some serious wishful thinking on the latter. China is forecast to raise their imports of soybeans to 103 mmt (3.78 bb) from 100 mmt and raise crush from 96 mmt to 100 mmt (3.67 bb) -- another sign of burgeoning demand.
All wheat production in the U.S. was pegged at 1.872 bb, up 3% from a year ago on higher harvested acres and yield. The all wheat yield was 50 bpa, up 0.3 bpa. Winter wheat production is forecast to rise by 10% to 1.283 bb, up 112 mb, with a yield of 52.1 bpa, up 1.2 bpa from a year ago. Harvested acres were up 7% compared to a year ago. Old-crop exports were dropped by 20 mb, raising the carry in stocks. Hard red winter production rose by 11% to 731 mb, while soft red winter rose by 25% to 332 mb, and white winter wheat production is forecast at 220 mb, down 10% from last year. Top producer, Kansas, is forecast to harvest 331.2 mb compared to just 281.25 mb a year ago.
Old-crop (2020-21) rose by 20 mb to 872 mb compared to 852 mb in April, while new-crop (2021-22) stocks are forecast to be 774 mb -- about 12 mb higher than the average trade estimate but still the smallest in seven years. Domestic feed usage was up 6% above 2020-21, with feed use expected to rise to 170 mb -- the highest since 2013-14. For 2020-21, hard red, soft red and spring wheat stocks rose by 12 mb each, while ending stocks for white wheat fell by 11 mb. The average farm price is projected to be $6.50 compared to $5.05 a year ago.
On the world front, the 2020-21 ending stocks number was just slightly less than the trade had expected and about 500,000 mt lower than April at 294.97 mmt. For 2021-22, the trade had expected ending stocks to rise to 299.4 mmt, but instead it was forecast to be nearly unchanged at 294.96 mmt (10.8 bb). Some notable changes were higher U.S., UK, Argentine and Ukraine wheat production, and lower Australian and Canadian production, along with a higher-than-expected production number for Russia, at 85 mmt. Many private analysts have the Russian crop at 79-80 mmt. Australia is expected to produce 6 mmt less than last year's record, and Canada is expected to harvest 3 mmt less at 32 mmt. China's wheat imports are forecast to fall from 10.5 mmt this year to just 6.8 mmt, presumably on the sharp rise in expected China corn. World wheat production is forecast to be record large, at 789 mmt, while world consumption will also be a record-large 788.7 mmt (28.98 bb).
The WASDE report was construed as bearish for wheat, with Kansas City having taken the brunt of selling.
Dana Mantini can be reached at firstname.lastname@example.org
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