By Karl Setzer

Much of the domestic supply and demand data in the April WASDE report was as expected. Corn carryout was reduced 150 million bu (mbu) as feed usage increased 50 mbu, ethanol demand was raised 25 mbu and exports were bumped up 75 mbu. This left ending stocks at a comfortable 1.35 billion bu (bbu) which was in line with trade estimates. Soybean ending stocks were left at 120 mbu as 30 mbu reductions to crush and residual demand were offset by an equal increase in exports. Domestic wheat carryout was raised 16 mbu to an 852 mbu total from lower feed usage estimates.

Minimal changes were also made to the global balance sheets. World corn carryout is now projected at 283.9 million metric tons (mmt), down 3.8 mmt from March from lower U.S. ending stocks and a smaller Argentine crop. The world soybean reserves are expected to increase 3.2 mmt to an 86.9 mmt total as the USDA unexpectedly increased the Brazilian crop estimate. The world wheat reserves are forecast to end at 295.5 mmt, down 5.7 mmt from the previous estimate due to elevated feeding, mainly in China. 

South American production was updated in the April release with one surprise. The USDA is now projecting a Brazilian soybean crop of 136 mmt, a 2 mmt increase from last month. This puts the USDA in line with other estimates, including the CONAB numbers. Brazil’s corn crop was left unchanged at 109 mmt. The Argentine soybean crop projection was left unchanged at 47.5 mmt, but the corn crop was lowered 500,000 mt from ongoing drought, putting it at an even 47 mmt.

Beef and pork balance sheets were updated as well. Beef production for 2021 is now projected at 27.64 billion pounds, a 60-million-pound increase from March. Pork production is now estimated at 28.28 billion pounds, a 405-million-pound reduction from last month. Compared to last month the USDA is predicting lower cattle weights but heavier hogs. A slower hog slaughter pace is the reason for the smaller pork production figure.

We continue to see a shift in global feed grain demand that is being closely monitored. For the past several months we have seen an elevated use of wheat in feed rations as both availability and price has been more favorable than corn. We are now seeing some countries shift to barley feeding in place of corn and wheat, including China. There are even thoughts this could lead to elevated barley planting in the global market, displacing other acres.

There are questions as to what this alternative demand will do to U.S. balance sheets. Chinese purchases of white wheat from the United States are at a 27-year high. Total U.S. wheat sales to China are at a 7-year high. This demand is not showing signs of slowing, even with elevated barley purchases, and will likely cause a further draw in U.S. wheat reserves. This makes the expected improvement to U.S. Wheat Belt weather crucial to prevent wheat ending stocks from dropping to a level that would call for rationing, same as with corn and soybeans. 

When it comes to alternative grain usage, we are also seeing elevated interest in soy meal displacement. This is not just from price, but from simple necessity. There are concerns over the volume of soybeans that will be available for crush later in the marketing year and this is generating more demand for products such as distiller grains. This is especially the case with more DDG’s becoming available with ethanol production starting to rebound.

The demand for alternative feed grain uses is expected to increase over the next several weeks, and likely last through the end of the marketing year. The U.S. soybean supply is dwindling and approaching a minimal level. While producers and commercials continue to trickle soybeans into the supply line, volumes are low and barely enough to keep some crush plants operational. The low movement is expected to continue, causing some facilities to halt operations until new crop supplies become available.

When it comes to corn demand trade is less concerned with domestic supplies. Instead, we are seeing attention focused on exports, mainly to China. China has a considerable volume of corn booked from the United States and there have been concerns some of these may be canceled. This is from the cheaper corn that is being offered from Argentina. While Argentine corn is cheaper, the value at which the U.S. corn was booked is still favorable and supply is more available. All importers, including China, are also concerned with the availability of Argentine corn long term.

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