Census domestic usage numbers for the month of December have been released with weaker numbers on corn. Corn use for ethanol in December totaled 430.44 million bu, a 10.2 percent decrease from December 2019. This decline also reduced distiller grain output with just 1.78 million tons being produced. This was the lowest DDG production total of the past four months.

The Census soybean usage data for December was more favorable. A total of 193.75 million bu of soybeans were crushed in December, the 2nd highest monthly volume on record. For the first four months of the marketing year, the United States has crushed 752 million bu of soybeans. This means crush only has to average 181 million bu of soybeans for the remainder of the marketing year to reach the yearly USDA projection of 2.2 billion bu of usage. While it seems this will be easy to accomplish, thinning US soybean reserves may make it harder to achieve.

We are starting to see shift in buying patterns from U.S. soybean crush plants, however. Typically soybean crushers only buy soybeans a month in advance. We are now seeing crushers expand their coverage beyond this, with some securing needs for this coming spring months. The primary reason for this is a concern over the availability of soybeans during that time frame. Another is that crush margins are starting to slip, and plants want to extend coverage to lock in profitability.

Trade is also monitoring the rate of soybean exports that are being made. Through this week U.S. export loadings on soybeans total 1.77 billion bu. By the end of February this total will approach 1.9 billion bu. At this rate the United States will likely have its yearly export loading projection of 2.23 billion bu met by the end of March with nearly half of the marketing year left to go.

The main focus of the market recently has been to ration old crop supplies, mainly soybeans. This has put more emphasis on old crop contracts than new crop at a time when futures need to be pushing for additional soybean acres. The current new crop corn/soybean ratio stands at 2.6:1 which is not at a level that would encourage additional soybean plantings. This ratio needs to widen to at least 2.8:1 given current market conditions to shift more acres to soybeans. This will need to take place soon as now is when many U.S. farmers starting locking in their inputs for new crop production, if not already done.

Trade may also be underestimating U.S. wheat acres this coming year. U.S. wheat producers are expected to plant a record number of winter wheat acres as returns on wheat are more favorable than for corn. The spread between the two grains has widened to more than $2.00 per bushel which favors wheat production. As a result, U.S. wheat farmers may plant a total of 1 million more acres than a year ago.

The United States has not just seen higher demand for its soybeans in the global market, but for its soy products as well. The one getting the most attention is soy oil as buyers who typically do little business with the United States are showing up in sales reports. This is the primary result of Argentine crush and export issues that have left importers with few choices for coverage. Another reason for higher sales is the taxes oilseed producers are putting on exports to ration their domestic inventories.

The recent rally in U.S. commodity values has had different impacts on the agricultural economy. On one hand it has provided economic relief to many farmers in the United States, especially when combined with COVID relief payments. Many farmers are currently seeing the best returns in the past six years. At the same time farmers have started to see their expenses rise, mainly land costs.

Even with this revenue improvement, the Biden Administration has announced it will be offering a debt relief pack to 12,000 U.S. farmers. This measure will temporarily suspend debt collection and foreclosures to farmers who took loans through two Farm Service Agency programs. This relief is being offered to offset ongoing losses from the COVID-19 outbreak and will last until the virus emergency is over.

The spread between corn and wheat is starting to become more of a market factor. This has narrowed to just $1 per bushel and is starting to gain the interest of corn buyers, mainly for feed. Typically we do not see feeders shy away from high corn values, but availability may make it more of a reality this year. This is especially true of soy meal becomes harder to secure, as wheat has a higher protein content than corn. This will be closely monitored over the next several months.

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