- HEADLINES: October USDA data leans slightly bearish corn/soy; Exporter wheat stocks/use pegged at record low level.
- The USDA October Crop Report was slightly bearish with corn/soybean futures pushing lower following the report’s release. November soybeans fell to their hard support at $12.00 while December corn uncovered end user pricing below $5.20. US wheat data was considered positive, and futures are slightly higher.
- NASS did not adjust US corn and soybean acres from their September forecast leaving corn harvested acres at 85.1 million acres and soybeans at 86.4 Mil acres. US wheat harvested acres was adjusted down 900,000 acres to reflect the results of the 2021 US Small Grain Report. We do not expect any further adjustments in US corn/soybean planted/harvested acres until the final January report. US wheat production is now considered final, with future adjustments only coming on the demand side of the balance sheet.
- The USDA raised their 2021 US corn yield by 0.2 to 176.5 bushels/acre, just below the 2018 record of 176.6 bushels/acre. This yield produced a US 2021 corn crop of 15,019 million bu or above 220 million more than use. Research maintains that the US corn yield will decline to 173 bushels/acre in January.
- There can be some adjustment in US corn/soy yields into the final, but the market’s focus will shift to demand and S American crop prospects. Also, will hedge funds desire to expand their commodity risk exposure heading into the end of the year amid surging energy values. The downside price risk in corn/soy/wheat is becoming limited amid the now known supply fundamentals.
- NASS lowered the Illinois corn yield to 210 bushels/acre and raised Iowa to 201 and Minnesota to 178 bushels/acre. Indiana and Ohio corn yields were lowered to 194 and 188 bushels/acre, respectively. The implied ear weight was right at trend and slightly above September. US 2021/22 corn end stocks at 1,500 million bu allowed NASS to hold their annual farmgate cash price forecast at $5.45/bu.
- NASS raised their 2021 US soybean yield to 51.5 bushels/acre with US production at 4.448 billion bu, up 74 million from September. The combination of the 0.9 bushels/acre increase in yield and 81 million bu found in the September stocks report pushed 2020/21 US soybean end stocks to 320 million bu. Such stocks were slightly larger than trade estimates and considered modestly bearish.
- The USDA held their 2021/22 US soybean export estimate at 2,090 million bu with crush up 10 million at 2,190 million bu. We would argue that USDA is too high with their soybean export estimate, but it will take months to fully adjust. US soyoil stocks were raised 320 million pounds to 1,798 million due to the extra crush and larger carry in. This could pressure the oil/meal spread.
US End Stocks (million bu)
September October
2020/21 2021/22 2021/22
Corn 1,236 1,408 1,500
Soybeans 256 185 320
Wheat 844 615 580
- US and world data largely matched expectations, but the Oct Report confirmed additional tightening of the US, world and exporter balance sheets. US wheat end stocks were lowered 35 million to 580 million bu, the lowest since 2007/08, to account for reduced final production. Lower projected feed use only partially offset the smaller crop size, and we view the USDA’s trimming of US wheat feed demand as premature. 2021/22 US HRW stocks were lowered 36 million to 311 million bu. KC wheat will be the longer-term bullish leader of the grain space as HRW stocks drop another 40-50 million bu in 2022/23 if acreage expansion fails to exceed 500,000.
- Major exporter wheat production was down 3.5 million mt amid lower revisions in the US and Canada. Exporter wheat consumption was lowered just 1.7 million mt, leaving end stocks at an extremely tight 52 million mt. Exporter wheat stocks/use was lowered to 12.6%, vs. 13.4% in September and which is record low. We also note that USDA has left Russian wheat exports unchanged at 35 million mt, which is viewed as 3-4 million too high. It remains that wheat’s current supply issues will only be solved with above trend yields across the Northern Hemisphere next spring/summer. A bullish price trend stays intact into mid/late winter.
Global End Stocks (million mt)
September October
2020/21 2021/22 2021/22
Corn 290.0 297.6 301.7
Soybeans 99.1 98.9 104.6
Wheat 288.4 283.2 277.2
- Chicago row crop markets have shed premium on the relative loosening of US balance sheets. Yet, the soy market cannot afford to lose planted area in 2022, the US yield debate is not quite settled, and dryness in Argentina will be much more attention grabbing should it persist into November. We continue to favour using harvest-based prices to lock in forward coverage. The world cannot afford to lose any S American corn yield this winter.