By Karl Setzer
The corn balance sheets released from the Ag Outlook Forum were mostly as expected by trade. Corn plantings are projected at 92 million acres with harvested at 84.4 million. Yield is projected at 179.5 bushels per acre (bpa) for a 15.15 billion bu (bbu) crop. Corn demand was bumped 500 million bu (mbu) mainly from feed and ethanol. Ending stocks for the 2021-22 yeah are projected at 1.55 bbu, 50 mbu more than this year’s ending stocks estimate. This is a 10 percent stocks-to-use ratio, basically unchanged from this year. The average cash corn value is predicted at $4.20 per bushel, 10 cents less than this year.
Soybean balance sheets were also mostly as expected. Soybean plantings are projected at 90 million acres for the upcoming year and harvested acres at 89.1 million. The soybean yield is predicted at 50.8 bpa for a 4.5 bbu crop. Rationing is expected to continue in soybeans, but the overall benefit for ending stocks may be limited. Ending stocks for the 2021-22 marketing year are projected at 145 mbu, only 20 mbu more than the old crop estimate. This remains a minimal 3.2 percent stocks to use. New crop cash values are forecast to average $11.25 by the USDA, 10 cents more than for old crop.
The Outlook Forum is predicting the largest changes for the wheat balance sheets. U.S. wheat plantings are forecast at 45 million this year with harvested acres at 37.2 million. Average yield on wheat is predicted at 49.1 bpa for a 1.8 bbu crop. Higher feed usage is pegged but exports are anticipated to decline. Ending stocks are still forecast to shrink 138 mbu for a 698 mbu carryover. This will give the United States a 33 percent stocks to use, and while ample, it is considerably lower than in recent years. The average cash value on U.S. wheat is predicted to increase 50 cents for a $5.50 average.
While at a slower than normal pace, the Brazilian harvest is underway. Harvest has been slowed from the delays to plantings and sluggish development from drought conditions. Field scouts in the country claim yield has not been hurt as much as thought though and a record crop is still expected. These individuals put the crop from 131 to 133 million metric tons (mmt). As the Brazilian harvest pace increases, we will start to see U.S. exports slow.
Even with a slower harvest pace, Brazil is selling a large volume of soybeans. According to the firm Safras, Brazil has sold 58 percent of its intended soybean production. This is up from the 43 percent that was sold last year at this time and the normal sales pace of 39 percent. Record high returns have prompted the elevated selling. It was thought Brazil may slow its selling rate after depleting its reserves a year ago, but this is not the case. Safras is basing its sales percentage on a 133 mmt crop, so the actual percentage amount booked may be even larger.
Trade is increasingly interested in what impact the delay we have seen to the soybean harvest in Brazil will have on overall production in the country. While this is likely to be limited on soybeans, it may have an impact on double-cropped corn. The leading grain production state of Matto Grasso is only reporting 1 percent of the Safrinha crop has been seeded. This compares to last year’s 10 percent and the five-year average of 9.5 percent. The Brazilian government puts a final planting date on corn to give the soil a rest before the next soybean crop, and concerns are starting to arise that this may be met.
As soybean demand starts to shift toward South America we will start to see more demand for U.S. corn in the global market. While corn sales have been steady and exports are high, the shift in soybean supplies will open the door for elevated port space for corn loadings. Thoughts are this will allow U.S. corn loadings to make up the lost ground they have seen this marketing year. If not, some analysts may start to back off their yearly corn demand figures, even with sizable sales already on the books.
One benefit for soybeans right now, other than exports, is the strong crush margins we are seeing. Data shows the average U.S. crush margin right now is close to $1.10 per bushel, even with elevated soybean futures. This is from the low crush we are seeing in South America and how it is bringing buyers to the United States. Given current U.S. feed demand this is likely to continue. High crush margins are also being reported in the global market, mainly in China, as that country rebuilds its hog herd.
Traders again are showing more interest in the U.S. dollar and its value. After bottoming in early January, the U.S. dollar has started to show strength. While the dollar has a long way to go to get back to the levels of late 2020, they have started to impact commodity values. A stronger dollar will help ration U.S. commodity demand as it raises the cost of the product for a foreign buyer. As the U.S. dollar rallies it will reduce the need for higher commodity values to ration inventory.
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