- HEADLINES: USDA surprisingly bullish on US corn/soy yield adjustments; East did not make up the difference for west losses; Seasonal lows appear to have been set in July.
- The USDA August Crop Report was bullish with US corn/soy yields falling below trade expectations. NASS pegged the US corn yield at 174.6 bushels/acre, a decline of 4.9 bushels/acre from trend with soybeans at 50.0 bushels/acre, a drop of 0.8 bushels/acre from trend. The smaller yield produced an immediate rally in Chicago futures with December corn back testing $6.00 while November soybeans reaching $13.69. We see selling pressure above $6.00 December corn and $14.00 November soybean futures.
- The big state by state corn yield falls occurred in the Dakotas/Minnesota. The North Dakota corn yield was just 106 bushels/acre, down 23.7 bushels/acre from last year with South Dakota at 133.0 bushels/acre (down 17.9) and Minnesota at 166 bushels/acre off 13.5. The Illinois corn yield was record large at 214 bushels/acre while Ohio was at 193 bushels/acre. The Iowa corn yield was 193 bushels/acre, some 7 bushels/acre below the state trend. The E Midwest did its best to offset the losses in the N Plains and Minnesota but came up short. August weather is more important with the key being another several new rain systems produce across the E Midwest.
US Stocks (million bu)
Jul Aug
2020/21 2021/22 2021/22
Corn 1,082 1,432 1,432
Soybeans 135 155 155
Wheat 844 665 665
US Yield
Corn 172.0 179.5 174.6
Soybeans 50.2 50.8 50.0
- US 2021/22 corn end stocks were forecast at 1,242 million bu, down 200 million bu from July with the average farmgate price raised $0.15 to $5.75/bu. The surprise was the dropping of 2021/2 2 US corn exports by 100 million bu to 2,400 million bu. Research would argue for a 2021/22 total of 2,800-2,900 million bu due to Brazilian crop losses and the coming demand from Canada for US corn/feed. We would also statistically argue that the USDA is too low with its US 2021/22 ethanol demand forecast by 100 million bu. The net result is that US 2021/22 corn end stocks will decline with time. Yet, the nearby focus will be on US corn yield confirmation and weather. We doubt that December corn can rally too far above $6.00 without confirmation of better US corn exports/ethanol demand.
- US 2021 soybean production was estimated at 2,339 million bu with a yield of 50 bushels/acre. The yield came in on the low end of trade expectations. The North Dakota soybean yield was 24.0 bushels/acre with Minnesota at 43 bushels/acre, and South Dakota at 39 bushels/acre. Such yields were down 28.4, 12.2 and 14.3 bushels/acre from last year. Illinois, Indiana, and Ohio soybean yields were record large at 64, 60 and 58 bushels/acre respectively. The east did not make up for the west.
- US soybean end stocks were increased in old crop to 160 million bu with new crop holding steady at 155 million. The USDA cut 2021/22 soybean exports by 20 million bu to 2,055 million bu and crush to 2,205 million bu. We would argue that both are too low with US 2021/22 soybean end stocks to fall below 100 million bu, which rallies Nov to $14-14.25.
- USDA wheat is the most bullish of the major ag markets, with exporter production lowered 17 million mt, far more than expected, and exporter wheat stocks pegged at a record low 12.5%. Combined Russian and Canadian production was lowered 20 million mt(!) with Kazakhstan’s crop down 0.5 million. EU plus UK production was raised by only 600,000 mt, and the burden of production/export growth now rests solely on Australia. Even assuming an Aussie crop this year of 30 million mt (which requires ideal weather there), exporter stocks will total just 52 million mt, vs. 59 last year and vs. 62 million mt in 2019. Wheat’s supply issue will be growing as importer demand increases during the autumn months.
- US wheat production was lowered another 49 million bushels, but not due to reduced spring production. US winter wheat yield was cut 1.8 bushels/acre amid reduced harvests across the PNW. Additional cuts to US production lie ahead as NASS left spring wheat abandonment unchanged at 3%, which is much too lower in our opinion. We expect US spring wheat production to be lowered another 20-30 million bu. 2021/22 US wheat feed use was lowered 10 million bu but consumption was otherwise left untouched. Stocks were lowered to 627 million bu, vs. 665 million in July. US wheat end stocks in 2022/23 will fall to 530-550 million unless sizeable acreage expansion occurs this autumn and next spring.
- NASS’s pro-active cuts to US corn/soy yields have changed the market’s perception on 2021/22 stocks/use rather quickly. Our biggest concern for end users is that the USDA is not yet accounting for the rapid return in corn and soy export demand, and even enlarged US wheat exports are likely in winter as supplies dwindle elsewhere. The outlook stays bullish.