By Michele F. Mihaljevich
WASHINGTON, D.C. – The U.S. supply of soybeans is tight and could get tighter if demand from China grows, a DTN market analyst cautioned after USDA released its latest crop production and ending stocks projections.
USDA has estimated soybean ending stocks of 190 million bushels, down from last month’s 290. The agency released the World Agricultural Supply and Demand Estimates and crop production reports Nov. 10.
The ending-stocks-to-use ratio, at 4.2 percent, is one of the tightest on record, said Todd Hultman, DTN’s lead analyst. “It’s just dangerously tight. I don’t know how else to put it. That could be some serious problems for end users of soybeans in the U.S. moving forward. That’s a big concern.”
USDA lowered soybean yield to 50.7 bushels per acre, down from 51.9 bushels last month. The production estimate fell from 4.3 billion bushels in October to 4.2 billion. The agency didn’t change export or crush projections.
The tight situation is “something we just had no clue would happen if we look back six months ago,” he explained. “It’s just phenomenal the way circumstances have changed so quickly.”
The lower ending stocks number and ending-stocks-to-use ratio are largely due to aggressive buying by China, Hultman said. Given the amount of sales commitments so far, the tight situation could get worse, he added.
The USDA has projected exports for 2020-21 to be 2.2 billion bushels, up 31 percent from a year ago. The country’s commitments to date are 1.78 billion, up 172 percent from last year.
Hultman said he was surprised USDA didn’t increase soybean export numbers. “Those sales have been so strong right now. I think it’s going to be very difficult for that export sale number to stay where it’s at. That makes this soybean situation probably even tighter than the 190 million bushels that USDA is showing today.”
USDA’s November carryover estimate is down from 610 million bushels in August, said Jim Mintert, director of Purdue University’s Center for Commercial Agriculture. “I don’t recall a year when we’ve seen that drastic of a change in the projected carryover when it wasn’t a major drought year. It’s really surprising.”
While the soybean yield wasn’t expected to drop as much as it did, he said the country isn’t in a true short crop situation. Even with the decrease, it would still be the third highest yield on record, Mintert pointed out.
Nathan Thompson, an assistant professor in Purdue’s department of agricultural economics, said states in the Corn Belt saw lower yields. In the Farm World region, Kentucky and Michigan had no changes in yield, while Illinois, Indiana, Iowa and Ohio saw drops from 3 to 3.6 bushels per acre. Tennessee had a 2.1 bushel increase. “The late season dryness was felt throughout the Corn Belt region,” he noted. “The southern states had some improved adjustments in their yield.”
USDA also lowered ending stocks for corn, dropping them from nearly 2.2 billion bushels in October to 1.7 billion. The market had expected a number around 2.1 billion, Hultman said.
“What we did not expect was how far USDA would bring down the estimate of ending corn stocks,” he explained. “That’s today’s real surprise. It’s the first time in four years that we’re finally getting a little distance from the 2 billion bushel mark, and yes, it’s a bullish influence for our corn price. Earlier in the year, we were talking about a possible carry of 3 billion bushels or more so this is really a game changer for corn and prices are reflecting that.”
The agency lowered the corn yield estimate to 175.8 (from 178.4 in October) and the production estimate to 14.5 billion bushels (from 14.7 billion). On the demand side, the export estimate was up from 2.3 billion bushels in October to almost 2.65 billion. Feed and residual usage was down; ethanol use was unchanged.
“A 325 million bushel increase in the export estimate is nothing to sneeze at,” Hultman said.
USDA’s corn export projection, if realized, would be a record, Mintert said. “I think the question is, are we done with respect to the increases? There’s a possibility of (exports) actually increasing even more down the road.”
The drop in corn ending stocks during the year is due in part to late season dryness and damage from a derecho in August, he said, but the biggest impact is from the demand side.
In the region, Indiana and Kentucky saw their corn yields remain unchanged in the November report, Thompson noted. Illinois, Iowa, Michigan, Ohio and Tennessee had drops from 1.1 to 4.2 bushels.
Based on historical data tied to the ending stocks-to-use ratio, DTN is projecting average cash prices for corn in the low $4 range and for soybeans, $12.50 or more.
While numbers for corn and soybeans were bullish, the report on wheat was neutral, Hultman said. The USDA estimate for ending stocks was 877 million bushels, down slightly from last month. Food demand was up. Projections for yield (49.7) and production (1.8 billion bushels) were unchanged.