12 May 2021

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  • HEADLINES: USDA May report offers something for everyone; Bullish vegoils/soybeans and disappointment for corn/wheat; It is all about weather into July.
  • The USDA May Crop Report was slightly bearish as the report cut US wheat, soybean, and corn exports far more than expected (relative to the current crop year). The US export cuts were made despite a 7 million mt cut in the 2021 Brazilian corn crop and the political obligation for China to secure at least $43.5 billion of US ag goods. Once again, the USDA is being conservative with its US ag trade forecasts, even as the world economy exhibits its best economic growth rates in a decade. Chicago grain/soy futures sold off on USDA report data. However, the need for US crushers and exporters to secure additional cash soybeans/corn from the producer is real. We would advise waiting for a deeper correction to make new purchases. This is no place to chase a rally, unless N American weather forecasts take a turn for the worse in coming days.
  • The USDA estimated 2021/22 US corn end stocks at a larger than expected 1,507 million bu by cutting US corn exports 325 million bu compared to the old crop year. The 2021/22 US corn export pace is a conservative 2,450 million bu. US 2021/22 feed/residual use was left at 5,700 million bu, even with a US 2021 harvest that was 800 million bu larger. US 2021/22 US ethanol use was raised 225 million to 5,200 million bushels.

US End Stocks (million bu)

2019/20    2020/21    2021/22

Corn             1,919        1,257        1,507

Soybeans      525        120        140

Wheat           1,028        872        774

  • NASS pegged US winter wheat production at 1,283 million bushels, up 112 million on last year, using a yield of 52.1 bushels per acre. Year-over-year yield cuts of 6-12 bushels/acre were made across the PNW. Year-over-year increases are expected in alt regions. If realised, NASS’s May yield projection will the be the third highest on record.
  • Old crop US wheat end stocks were raised 20 million bushels on reduced exports. HRW, HRS and SRW stocks were increased 12 million each, with white stocks cut 11 million. New crop stocks are pegged at 774 million bushels, though USDA’s export and feed use forecasts are viewed as too tow.
  • The US average corn farmgate price was forecast at $5.70/bu with USDA adjusting 2020/21 US corn exports up by 100 million to 2,775 million bu. The 2021/22 US corn farmgate price shows a gain of $1.35/bu compared to 2020/21.
  • World 2021/22 corn end stocks were forecast at 292.3 million mt, up 8.8 million with China forecast to import 26.0 MMTs. The USDA raised their estimate of Chiina corn imports in the old crop year to a like 26.0 million mt. Brazilian corn production was estimated at a much too high 102 million mt in 2020/21 and a record 118.0 million mt next year. Brazil looks to export 43 million mt ofn 2021/22 corn, which appears high.
  • The USDSA estimated 2021/22 US soybean end stocks at 140 million bu by cutting exports to 2,075 million bu. This is down 205 million from the current crop year and far too low. US soybean crush was raised to a record large 2,250 million bu on massive biodiesel demand. USDA forecasts that the US would consume 12.0 billion pounds of soyoil for biodiesel, up 2.5 billion pounds, while exports are cut to just 1,450 million pounds (down 850 million pounds). The USDA appears willing to cut US soybean exports to buy time to gauge ftnal US soybean seedings in June.

Global End Stocks (million mt)

2019/20    2020/21    2021/22

Corn            304.5        283.5        292.3

Soybeans    96.5        86.5        91.1

Wheat         299.4        294.7        295.0

  • 2021/22 World soybean production was estimated at 366.5 million mt (up 23 million) while world trade only grew 1.5 million to 172.8 million mt. China looks to import 103 million mt of soybeans in 2021/22. 2021/22 world soybean end stocks are forecast at 91.1 million mt with a Brazilian crop of 144 million mt. This is up 4.6 million mt assuming the world weather is normal for a year. November soybeans at $14.75 and above is overvalued. This is no place to chase a Chicago rally.
  • Major wheat exporter stocks are projected to rise only 840,000 mt in 2021/22, with stocks/use declining slightly amid enlarged export demand. Total world wheat trade in 2021/22 is forecast to reach a record 202 million tons, we note that world trade is very often understated in May. Exporter stocks of 62 million tons also assumes a Russian crop of 85 million mt vs. trade estimates of 78-81 million and a Ukrainian crop of 29 million, vs. 25 last year. Big wheat crops are needed to keep world wheat exporter stocks stable.
  • The USDA has set the benchmark for new crop supply and demand. It is all weather going forward, and the adjustment in yield/production that follows. The USDA has bought itself (and the market) time to better understand North American, Russian, and Asian weather patterns with deep US/world export cuts. If the US finds additional planted acres in June, you can bet that US/world trade totals will enlarge. We see Dec corn below $5.70, November soybeans below $14.00, and July KC wheat below $6.60 as cheap, with the summer growing season ahead. We look to buy breaks into late May. The decline of 595 million bu of US corn, soybean and wheat exports looks too big amid a smaller Brazilian corn crop and pledges by China to secure $43.5 billion bu of US ag goods by year end. We estimate that China will book 40-44 million mt of US soybeans or 1,540 million bu meaning that “others” are all going to secure Brazilian beans.