MINNEAPOLIS — The bullish momentum provided in last month’s U.S. Department of Agriculture’s supply and demand estimates report was dulled by a slightly bearish corn report issued Feb. 9.
Brian Basting, Advance Trading research analyst, said in a Minneapolis Grain Exchange-hosted teleconference that China continues to be a big player in U.S. corn, soybean and wheat exports. Here are details of Basting’s analysis.
What were the bearish numbers in the corn balance sheet?
“The trade was looking for a carryout estimate down to 1.363 billion bushels, anticipating a significant increase in exports of U.S. corn in the balance sheet following the recent unprecedented sales to China. But USDA only increased the corn estimate of exports by 50 million bushels and so the carryout is 1.502 billion bushels.
“Last month it was 1.552 billon bushels. The 1.502 billion bushels was about 140 million bushels above what the trade was expecting and at the high end of trade estimates.
“The biggest highlight on the world corn balance sheet was the forecast of Chinese corn imports was increased from 17.5 million metric tons to 24 million this month. That would be a record of corn imported by China for this current year.”
USDA’s carryout estimate for soybeans of 120 million bushels for 2020-2021 was right in line with trade expectations.
“The only change USDA made in the balance sheet this month was a 20 million bushel increase in the exports, reflecting some very strong shipments of late and maybe some delayed shipments out of Brazil.
“I guess the question the market has is that we have a very strong unshipped sales booked for soybeans still out there and we’ve actually now almost sold the total amount USDA says we’ll ship for the year.
“It seems to us that one of two things is going to happen. We’re either going to have to see some cancellations, which is certainly possible, of those soybean sales of U.S. beans that are on the books or rolled to 2021-2022, or we’re going to see more imports. It seems to us that export number is a bit conservative given the pace of shipments and sales that we’ve seen.
“USDA did not change its forecast of Chinese soybean imports. It’s still 100 million tons, which is what it was last month. That’s a record for soybean imports from all sources this year.
“There were no changes to the Brazil and Argentina crops that are growing right now. There’s a very slow soybean harvest in Brazil due to wet weather. That’s a 10-year slowest pace of soybean harvest in Brazil. So, we’re really looking at a slow export program out of Brazil right now.”
The all wheat carryout was unchanged at 836 million bushels, and the average farm price was increased by 15 cents to $5 per bushel this month. What were the key adjustments of note in the wheat classes?
“We did see some positive news from a producer’s standpoint in hard red spring wheat. The hard red spring export forecast increased by 15 million bushels compared to last month.
“We’ve seen a brisk pace of hard red spring wheat sales and shipments, notably to China, for example, so far this crop year. We’ve sold about 23 million bushels of hard red spring to China. Last year at this time we’d sold only 2 million bushels. The USDA did increase its forecast of imports from all sources by China by 1 million tons (or 37 million bushels) to 10 million tons.
“China has obviously been very aggressively buying U.S. corn of late. Last fall they had bought quite a bit of soybeans, too, and throughout the course of that they have been buying some wheat also, primarily spring wheat and also some white wheat.
“The carryout for hard red winter spring last month was 279 million bushels, and it’s 258 million bushels this month. That’s not an extremely tight situation. It was 280 million bushels last year. The carryout is not at a historically low level, but it’s moving in a direction now where the market is going to be very sensitive moving into spring.”
Looking ahead to the March prospective planting report, what do these most recent numbers mean in terms of possible acreage?
“I think the market is bidding for soybean acres right now for this spring for producers. I would say today one of those areas that is primed for a switch would be the northern plains moving away from wheat and perhaps into the oilseeds. That’s what the market signals are sending right now to producers.
“But the economics and other things could change between now and then, but that’s the signal the marketing is sending today.”