July 25, 2021

USDA balance sheet leans bullish for corn

MINNEAPOLIS — The mixed crop production and supply and demand estimates reports on June 10 had about 15 minutes of fame before the trade turned its focus toward the weather.

Randy Martinson of Martinson Ag Risk Management dissected the U.S. Department of Agriculture’s reports in a Minneapolis Grain Exchange teleconference.

Why did the corn balance sheet grab so much attention?

“The report was bullish on the U.S. corn side. As expected, ethanol production increased by 75 million bushels. Exports were also increased by 75 million bushels. That jumped use by 150 million bushels. There were no changes on the supply side, so that put 2020-2021 old crop corn ending stocks down to 1.107 billion bushels, 91 million bushels lower than expected by the trade.

“On the new crop side, the supply was left unchanged. The beginning stocks were the only change we saw for the 2021-2022 year with the ending stocks dropping down by 150 million bushels to 1.357 billion bushels. That was about 49 million bushels lower than expected by the trade. That was a little bit friendly for the corn market.”

The domestic soybean supply and demand estimates were a bit bearish.

“As expected, USDA cut 2020-2021 crush by 15 million bushels. That followed through to increase old crop stocks by 15 million bushels to 135 million bushels. That was about 13 million more than expected by the trade.

“For the new crops, the only change we saw was the beginning stocks increased by that 15 million bushels which was about 13 million bushels more than expected by the trade.”

Were there any surprises in the wheat estimates?

“I was surprised USDA increased old crop wheat by 20 million bushels. That followed all the way through to cut the stocks by 20 million bushels and putting 2020-2021 ending wheat stocks at 852 million bushels. That was 16 million bushels lower than expected by the trade. USDA raised the exports for the four major wheat categories by 5 million bushels each.

“USDA made some adjustments in all wheat new crop on the production side. Hearing about how good the winter wheat was, USDA raised the average yield by 0.7 bushels per acre. That increased production by 26 million bushels putting it at 1.898 billion bushels. Take that with the 20 million bushel decrease in beginning stocks and we saw 2021-2022 supplies increase by 6 million bushels.

“USDA then made some adjustments, increasing feed demand by 10 million bushels. Because of the high price of corn we’re seeing a little more wheat feeding than anticipated.

“The adjustments lowered 2021-2022 ending stocks by 4 million bushels to 770 million bushels, 5 million bushels lower than what the trade expected. So, that was a little friendly for the wheat market.”

Did the South American corn and soybean numbers meet expectations?

“Everybody was anticipating what was going to happen as far as world numbers were concerned. Brazil’s corn crop production dropped to 98.5 million metric tons. That was 2.3 million metric ton above expectations but 3.5 metric tons lower than the previous month.

“Brazil soybean production was a little higher than anticipated by the trade. It came in at 137 million metric tons, 1.2 million metric tons above expectations and 1 million metric ton above last month.

“USDA made no changes to Argentina’s numbers. They were a little higher than expected by the trade.”

Tom Doran

Field Editor