U.S. corn and soybean production prospects appear to be pretty well defined as we approach the September crop report in less than two weeks. Last month’s USDA report indicated a national average corn yield of 174.6 bushels per acre for a 14.75-billion-bushel crop, with soybeans at 50.0 bpa for a 4.34 bbu total.
Debate continues as to whether seemingly good results east of the Mississippi River will offset this summer’s dryness in the Northwest, which has cut into yields in Minnesota, North Dakota and South Dakota. Trade estimates ahead of the August Production report had corn yields in a 174.5 to 180.0 range and beans at 49.3 to 51.4. Ideas on the former have likely been scaled back on the top end to something closer to USDA estimates, while recent rains could boost soybean prospects to a little north of 50.0 bushels per acre.
The other variable which may have a bearing on the September report would be planted acreage, especially for corn, with some arguing Farm Service Agency acreage data for August, along with the rapid pace of planting, could push the total to 1.3 to 1.7 million higher. Using 170 bpa on the incremental acreage “might” add another 250 million bushels of production to the corn supply and raise carry-out to a more comfortable 1.5 billion bushels and a 10+% stocks to use ratio. Few are suggesting more soybean acres, so the price risks associated with the September production numbers would seem to be slightly to the downside for both corn and soybeans with more acres of the former negating a yield reduction while higher soybean yield could add 40 to 50 million to the supply of the latter.
International uncertainties in the corn market? Where does one start? Well, China, China, China for one. Demand for both corn and soybeans heading into 2021-2022 is a question mark, especially despite a few bullish private analysts calling for imports of the former to approach/exceed the 30 MMT level. The USDA has been content to hold their corn import forecast at the 26 million metric tons mark for both 2020-2021 and 2021-2022 in at least the past 3 monthly supply and demand reports. And, after a flurry of buying activity in early-mid May when China came in for nearly 425 million, they have not made an additional purchase since. They have, in fact, cancelled about 26 million in previously made 2020-21 purchases. Which does tend to make the market a little nervous.
In addition, despite a much smaller Brazilian crop this year which had earlier thought to be a decent supply source for China once the phytosanitary barriers were resolved, China does have access to considerably more other exporter corn supplies this year.
Ukraine’s crop is expected to rebound from 30.3 MMT in 2020-21 to as high as 39.0 with exports likely to be some 8.5 MMT greater. And, if these numbers are realized, Ukraine’s exports to China could balloon from around 4-6 MMT this past year to as high as 12 in the coming campaign. With Ukraine being a much larger player this year and Russia expected to boost its exports by as much as 2 MMT, the USDA’s 100 mbu lower U.S. export forecast for 2021-22 in August seems warranted. Otherwise, early indications on export sales heading into 2021-22 show a record amount on the books with China having 52% of the 921 million total.
Additionally, sales to all other destinations at 439 mbu are 11% greater than a year ago at this time. Sales to Western Hemisphere markets are 23% greater while those to other Far East markets as well as North Africa are lagging behind.
- China has at least 50% MORE on the books compared to a year ago at this time;
- the U.S. will be facing considerably more Black Sea export competition;
- other Far East markets have been slow to book 2021-22 U.S. corn; and
- Mexico, along with other Western Hemisphere destinations, are 23-34% ahead in their U.S. purchases.
For the first half of the year, U.S. corn export prospects look bright with reduced supplies not offset by larger Black Sea crops. But, how about from February-March forward?
This is where it really could get interesting. High prices are expected to lead to more acres in South America over the winter with a 4% increase or more of 2.5 million acres expected. Production is forecasted to recover by nearly 25%, and if achieved, would push an additional 19.5 MMT of corn (765 million bushels) into the world market. This would have a direct impact on the U.S. and more than likely solidify its role as the residual supplier to the world market, at least for the late summer of 2022 and beyond.
U.S. producer price prospects for corn in the short-term look reasonably good. However, the strength of Chinese and other importer demand over the winter months will be key to sustaining prices above the $5.50 level. Beyond that, a recovery in South American production could pressure corn prices from spring forward.
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